Royal Bank of Scotland’s boss has admitted the lender’s £421m bonus payments were “outrageous” after a seventh straight year of losses.
Ross McEwan said the bonus pool was down significantly on previous years but conceded that the public were right to be angry about the figure.
The bank racked up another £3.5bn in annual losses today, taking the running total to nearly £50bn since it was bailed out in 2008.
However, Mr McEwan said the company, which is still 80 per cent owned by the taxpayer, had made significant progress in becoming “stronger and simpler”.
He confirmed he will not take a £1m “role-based” incentive, which is paid on top of salaries by some banks, and said the company’s overall bonus pool had been cut by 21 per cent.
However, he told BBC Radio 4’s Today programme people were “quite right” to regard the sum of money the bank was handing out as “outrageous”.
“Yes, and to be quite honest they are right,” he said.
“It’s not something I am going to change or can change today. What I can do is focus on this business and you are starting to see the progress we have made after one year.
“The underlying profits of this business are up. The capital is up, the costs are down. We are focusing on rebuilding the trust of customers.”
He added: “Our bonus pool is significantly down over the last five years, it is down on last year. But what is really important is that these same people are the ones that you and I want to actually reform this bank and get it back to being a great bank that can get the money back for the UK.”
Mr McEwan went on: “I understand the issue, but I need to be in a position to pay fair pay for people to do these jobs. There are some fairly technical jobs that we need to get right.”
RBS also confirmed that Sir Howard Davies, the former head of the now defunct Financial Services Authority, will be its chairman from September. He replaces Sir Philip Hampton, who is set to join GlaxoSmithKline.
In a letter to Sir Howard, Chancellor George Osborne called on the new chairman to ensure the bank’s business is “conducted to the very highest ethical standards”.
He wrote: “Given the extraordinary support it has enjoyed in the past from taxpayers, I know you recognise that RBS must remain a backmarker on pay and continue to show responsibility and restraint.”
Since its rescue from the brink of collapse in 2008, RBS has focused on offloading many of its foreign and investment banking assets to become a more UK-focused bank centred on retail and commercial banking.
RBS said the latest loss was attributable to a £4bn write-down on the value of its US arm Citizens, having recently cut its stake in the business.
Operating profits were £3.5bn - the highest since 2010 - as RBS said it had made significant progress towards building a bank that is “stronger, simpler and better for both customers and shareholders”.
Other one-off items included £2.2bn of conduct and litigation charges, including £320m in the fourth quarter relating to the rigging of foreign exchange markets and a further £400m to cover compensation for the mis-selling of payment protection insurance.
The chief executive said he could not give a guarantee that there would not be a repeat of scandals such as fixing of the Libor rate.
“Now look, I can’t,” he said. “What I can do is give you the guarantee we are building a really good customer bank and we are centring that bank on the areas that are strong in the UK and in western Europe so we can get it right.”
Mr McEwan said it was “certainly not going to be months” before the bank was ready to return to the private sector, but it would be “much shorter” than 10 years.