£5.6m golden goodbye for bank boss as 2,000 staff axed

Mr Hester, who has overseen a massive restructuring at the bank, will get £1.6m in pay and benefits and a potential £4m shares windfall. However, he will not not receive a bonus for 2013.

He will leave in December, or sooner if a successor is in post before then. RBS is already looking for his replacement.

It emerged last night up to 2,000 jobs at RBS’s investment bank are to be axed today, although the bank declined to comment.

The cuts are expected to be spread around the bank’s offices across the world, but it is feared some workers in the City will lose their jobs as the global investment arm is decreased from 11,000 to 9,000.

Announcing his departure following a board meeting yesterday, Mr Hester said: “We are now in a position where the Government can begin to prepare for privatising RBS. While leading that process would be the end of an incredible chapter for me, ideally for the company it should be led by someone at the beginning of their journey.”

Since being bailed out by the taxpayer at the height of the economic crisis, the bank has seen five years of losses and there were angry scenes at its annual general meeting last month when shareholders tackled bosses over £607m worth of bonuses paid out while reporting losses of £5.2bn.

The bank insists, however, its turnaround efforts are paying off as it reported pre-tax profits of £826m in the first quarter, up from a loss of £1.5bn in the same period last year and its best performance since 2011.

Mr Hester said it had been the board’s choice for him to make way for someone new to lead the bank through privatisation.

The Government pumped £45.5bn into RBS to keep it afloat during the financial crisis, giving it an 82 per cent stake in the bank.

Chancellor George Osborne said Mr Hester had brought RBS “back from the brink” and had “made an important contribution”.

“When Stephen Hester took on the job at RBS in 2008 it was a bust bank with a broken culture and posed a huge risk to financial stability,” he added. “RBS today is safer, stronger and better able to support its customers.”

A high-powered commission of MPs and Lords are reportedly set to imminently recommend that the bank is split into a good bank and a bad bank in a long awaited report on RBS.

Philip Hampton, chairman of RBS, praised Mr Hester’s leadership of the bank and said he would be leaving it in a “vastly improved position that many would have thought impossible five years ago”.

He added: “His achievements have been considerable.”