Cameron Aims to Stop $800M in Bonuses at RBS

By Robert Hutton and Thomas Penny - Nov 11, 2011 10:23 PM GMT+0700

U.K. Prime Minister David Cameron said he can stop Royal Bank of Scotland Group Plc (RBS) from paying a reported 500 million pounds ($800 million) in bonuses to investment bankers this year.

“We can stop the 500 million, yes, absolutely,” Cameron said in an interview on BBC Radio 2 today. “That is not the agreed figure. That’s a proposal I’ve read about in the newspapers.” The Sunday Times reported the 500 million-pound figure on Nov. 6.

RBS was rescued by the U.K. government in 2008 and is now 83 percent state-owned. Lloyds Banking Group Plc (LLOY), which was rescued at the same time, is 41 percent state-owned. The government has tried to manage both at arm’s length, with a view to privatizing them again when the market recovers. The issue of large bonus payments to traders at bailed-out banks has strained that policy.

The bank cut the amount it set aside for bonuses last year at its investment-banking unit by 27 percent to less than 950 million pounds as part of an agreement with the government. RBS posted a net loss for the first nine months of the year of 199 million pounds, compared with a 1.14 billion-pound loss for the same period a year earlier.

The prime minister said he didn’t want to “spend the next six months simply having a war of words, a great big fight, with the banks about everything” and instead wanted to push them to lend money and help the economy recover.

“The real need in our economy is to get growth,” Cameron said. “You can’t do that if your entire life is spent at war with the banks.”

The British Bankers’ Association said Nov. 9 that lending to companies was 11 percent ahead of a target agreed with the government in February known as Project Merlin.

RBS said it had no comment on Cameron’s statement.

To contact the reporters on this story: Robert Hutton in London at rhutton1@bloomberg.net; Thomas Penny in London at tpenny@bloomberg.net

To contact the editor responsible for this story: Eddie Buckle at ebuckle@bloomberg.net