RBS chairman Philip Hampton has defended the bank’s decision to protect senior management in the wake of the Libor scandal, citing the need to avoid “a mass series of assassinations”.
This month, the FSA and US regulators fined RBS a total of £390m for manipulating Libor. Head of the investment bank John Hourican quit over the scandal and gave up £5m in bonuses as a result.
MPs at a Parliamentary Commission on Banking Standards session yesterday questioned why Hourican is the only senior executive to have stepped down following the scandal.
Hourican’s deputy, Peter Nielsen, was the global head of rates at the time when the Libor rigging occured. MPs asked Hampton why Nielson should keep his job rather than take responsibility in the same manner Hourican did.
Hampton said: “We think a single point of accountability is necessary and not a mass series of assassinations.
“We thought that one person should take primary accountability for everything and that should be John Hourican.”
The commission questioned Hampton and chief executive Stephen Hester over bank’s pledge to recover the fines from bankers’ bonuses.
Conservative MP and commission chair Andrew Tyrie says he was not sufficiently reassured that the fines will be taken from the bonus pool.
He says: “RBS intends to pay its fines for fixing Libor and other important rates from past, current and future bonuses. It is logical to do so.
“We were not given sufficient confidence today that the arrangement for funding the fines from bonuses will do what it says on the tin.
“This must be more than an exercise in creative accounting. It would be all too easy to artificially adjust a bonus pool, the size of which is yet to be decided.
“RBS today undertook to show clearly where the fines are being paid from and who is bearing the losses. The Commission will look closely at these figures when they are published next month to establish whether adequate clarity has been provided.”
Hampton defended Hester’s £780,000 bonus payout, saying he is underpaid in comparison with other global bankers.
John Charcol senior technical manager Ray Boulger says: “There is always a dilemma in situations like this. The public craving is to punish more than one person but by doing that it could be even more damaging to the bank and, ultimately, the taxpayer. There is no excuse for not picking up on the traders’ behaviour but how far do you go down the chain by punishing those not directly involved?
“And there is an argument to be had that having been through something like this they will be better managers in the future.”