Bank bonus row set to ignite

9th Jan 2011 13:25

The political row over bank bonuses is set to intensify next week as details of the size this year's bank bonuses start to be revealed.The government is said to be demanding that British banks give guarantees on business lending and pay disclosure as the trade-off for getting approval for bonuses that could total £7bn.The issue is likely to come to a head on Tuesday when Bob Diamond, Barclays' new chief executive and UK's highest paid banker, sits down in front of MPs on the Treasury Select Committee.Reports at the weekend suggest call for restraint by politicians in the UK and also the US are set to be largely ignored. Labour has already accused the government of backtracking on promises to get tough if banks paid themselves excessive amounts.Stephen Hester, chief executive of 84% taxpayer-owned Royal Bank of Scotland, is tipped to pocket a £2.5m performance bonus as part of a total payout to staff of £1bn. He waived his £1.6m bonus last year.Hester's total pay this year could climb to £6.8m this year adding in his £1.2m annual salary, £420,000 pension contributions and an award of £2.69m worth of restricted shares in the bank to cover the options foregone when he moved to RBS from British Land.In a radio interview Sunday, prime minister David Cameron said RBS should not be "leading the way" on bonuses but should be a "back marker", adding that the banks need to do more to lend to small businesses."What I want to see is socially responsible banks behaving responsibly, and proper agreements on lending to businesses, large and small," the PM added.Business secretary Vince Cable has already warned the banks that "robust action" will be taken if the City fails to curb its excesses, though chancellor George Osborne is not thought to support this tough stance. The banks argue that they risk losing their top staff if they cut bonuses.Meanwhile, the Sunday Times reports that US investment bank giant Goldman Sachs will pay its staff more than $13bn (£8.4bn) this year in bonuses. That is a 20% cut on last year but still equates to $370,000 a head for its 35,000 employees.