U.K. Prime Minister David Cameron said he’ll veto any attempt by Royal Bank of Scotland Group Plc to increase the total pay bill for bankers, including bonuses.
Cameron’s announcement followed a call by the opposition Labour Party for the chancellor, George Osborne, to reject possible moves by RBS to ignore a cap on bonuses set by the European Union. RBS may try and win backing from the government, its largest shareholder, to invoke a clause in EU law that would otherwise limit bonus pay to 100 percent of base salary starting in 2014, the Financial Times reported today.
“If there are any proposals to increase the overall pay, that is the pay and bonus bill, we will veto it,” Cameron told lawmakers in the House of Commons in London today. He also said the cash-bonus limit of 2,000 pounds ($3,284) at RBS will be repeated this year.
Parliament voted down a Labour motion today saying government banking reforms haven’t gone far enough, and arguing the U.K. shouldn’t back moves to increase EU bonus caps. The U.K. challenged the bonus caps at the EU’s highest court in September, saying the measures were flawed. The motion was defeated by 304 votes to 242.
“This government has done more than any to bring the banking system back under control,” Osborne told reporters today. “These European rules will not lead to bankers being paid less. It will lead to a Fred Goodwin-style situation where you won’t be able to take the money off the bankers when things go wrong,” he said, referring to RBS’s former chief executive officer who was stripped of his knighthood after leading the bank into the world’s largest bailout.
Labour’s motion argued that bank pay remains “unacceptably high” and said Cameron’s government, as a majority shareholder in RBS, should not approve any request to increase the cap.
RBS, Britain’s largest state-owned bank, based in Edinburgh, said in a statement today that “no decisions have been made” and it’s “in consultation on overall pay policy” with shareholders, without elaborating.
The Confederation of British Industry lobby group said an arbitrary cap on bonuses was wrong and RBS’s judgment on bonuses must be based on whether it can continue to motivate and attract talented staff.
“A vibrant, competitive banking sector is critical to the recovery and for the long-term wellbeing of our economy,” CBI Director-General John Cridland said in an e-mailed statement. “An arbitrary cap on structure is the wrong way to boost choice in banking.”