King: Taxpayer-backed firms must offer fair bonus structure

Bank of England governor Mervyn King has called on the likes of Royal Bank of Scotland and Lloyds to make fair decisions on remuneration of its leading members of staff.

At a speech in Brighton yesterday, King said that the tragedy of this financial crisis is that those who have suffered most are those who had no responsibility for it.

He said that the legitimacy of a market economy would be challenged if “rewards go disproportionally to the small elite, especially one which benefited from the support of the taxpayer”.

He said: “Those taking decisions on remuneration, in the financial sector and elsewhere, need to understand that a market economy rests not just on incentives, but on the acceptance that the distribution of rewards is fair. That sense of fairness underpins the commitment to a market economy. An even bigger tragedy would be to deny the prosperity that flows from a market economy to those who need it most.”

Royal Bank of Scotland is currently 84 per cent owned by the taxpayer, while Lloyds Banking Group 41 per cent owned.

Earlier this week, Labour leader Ed Miliband has called on the Prime Minister to intervene and stop RBS chief executive Stephen Hester taking his bonus which is expected to be around £1.6m.