Royal Bank of Scotland is at the centre of a fresh pay row after it emerged it had handed £1m in shares to Stephen Hester, who was in charge of the bank when traders there helped to rig foreign exchange markets.
The anger over Hester’s award comes alongside a report from an influential group of MPs and lords on Monday calling on regulators to step up work to overhaul the banking sector after the foreign exchange scandal “exposed how much work there is still to do”.
Hester, who was forced out as the chief executive of RBS last year, received a chunk of shares earlier this year and is due another batch, likely to be worth around £2m, early next year under long-term incentive plans. Previous payments to Hester from the bailed-out bank provoked anger, and he was repeatedly forced to waive annual bonuses while running RBS.
The latest payouts to Hester, now chief executive at insurer RSA, provoked a fresh furore given that RBS was among five major banks fined last week for rigging foreign exchange markets as part of “free-for-all culture” on dealing floors.
The share awards were described as “outrageous” by Labour MP John Mann, a member of the Treasury select committee.
“It’s outrageous the he has been paid this extra £1m considering … [what] was going on, including while he was in charge,” said Mann.
“He shouldn’t be getting any more money.”
There is no suggestion that Hester or other executives were aware of misconduct by traders.
Following the announcement of record fines meted out to banks by the Financial Conduct Authority (FCA), the city regulator, RBS’s current chief executive, Ross McEwan, apologised to consumers and admitted the conduct of up to 50 former and current employees was under investigation.
RBS, which is more than three-quarters owned by taxpayers, declined to comment on the revelations over Hester’s share awards, which were first highlighted in the Mail on Sunday.
The Treasury also had little to say about the specific payout. A spokesman sought to flag up more general efforts to crack down on unacceptable pay practices in the banking sector.
“We have strengthened the remuneration code … Firms must also have policies in place so they can reduce or cancel bonus payments where poor performance comes to light, and from next January further reforms mean they will be able to claw back bonuses already paid out,” the spokesman said.
“Decisions on individual remuneration are a matter for RBS,” he added.
The foreign exchange revelations are just the latest in a string of scandals in the banking sector and have fanned fears that support for reform is flagging.
Former members of the parliamentary commission on banking standards will on Mondaycall for faster action, especially on moves to force banks to ringfence their high-street operations. They warn that plans to separate high-street and investment banks are vulnerable to being watered down by bank lobbying.
A progress report from former members of the banking standards committee into how their recommendations are being implemented said: “Almost 18 months on, there are already signs that memories of the events that prompted the creation of the commission are growing hazy, and that, as banks recover their strength and self-confidence, their support for reform is also growing weaker.”
The commission, which included the archbishop of Canterbury, Justin Welby, and was chaired by Conservative MP Andrew Tyrie, was set up over the concerns about ethics in banking raised by a fine on Barclays for rigging the Libor interbank lending rate.
One of its key recommendations, prompted by concerns that banks will try to dilute reforms, was for the ringfence between high-street and investment banks to be “electrified” – forcing a breakup of a bank which fails to comply.
Tyrie says the UK cannot afford to do without an “effective and electrified ring fence”.
Overall, the commission’s recommendations on a range of areas from pay to competition were crucial to protect taxpayers and consumers, added Tyrie. But he was critical of progress so far.
“The forex scandal has exposed how much work there is still to do,” he said.
“The fact that, several years after the Libor scandal broke, the forex market may have been similarly exposed to rigging is extremely concerning. [The parliamentary commission] made wide-ranging proposals to deter such behaviour, but banks and regulators do not yet appear to be fully implementing them.”