Angry with RBS? Take a look at the Spanish bank bonuses that British customers are helping fund

by David Mathieson

Poor Stephen Hester.  Poor ex-Sir Fred.  Not of course in financial terms, but perhaps unfortunate to find themselves the individual objects of public indignation while others escape without the slightest scrutiny.

Chukka Umunna made the points again eloquently on the Today programme last week: there would be no RBS to pay Hester or Goodwin anything had we, the tax payers, not come to the rescue of the stricken bank and saved it from complete collapse in 2008.

When millions of public sector workers are having their wages, salaries and in some case jobs cut, the payment of bonuses at RBS – always discretionary and never contractual – should not even be on the table.

But does the story stop there?  Hardly.

RBS is different only in that it is more than 80% owned by the state. For all the other retail banks, the bonuses being paid are funded from the charges paid by millions of ordinary account holders.

As part of the restructuring RBS has had to sell off hundreds of branches to the Spanish bank Santander (which has already brought up Alliance and Leicester).  So millions of people in the UK are account holders with one of the biggest banks in Europe and the largest in Spain.

Spanish banks too have their problems.  Strict state regulation of precarious investment vehicles – tighter than anything our City regulators were prepared to contemplate – ensured their viability as going concerns during first wave of the crisis.

But the collapse of their real estate market has left Spanish banks struggling to distinguish between assets and liabilities with substantial holes in their balance sheets.

Northern European banks have become increasingly reluctant to lend to their southern European counterparts and the Spanish banks have been at the forefront of those forced to borrow from the European Central Bank – effectively a form of state aid.

Has any of this chastened the pay outs at Santander?  Not a bit of it, at least not yet.

Francisco Luzón, the Santander director responsible for Latin America is about to take early retirement. According to the El País newspaper last week he will give up an annual salary estimated at around €7m – including a bonus of more than €2m.

But the fall will be softened by retirement into an annual pension of nearly €3m.  This calculation is based on a pension pot valued at €55 million at the end of 2010 – and that figure may have increased further over the past year.

Luzon’s pension is not unusual.   When Jose Ignacio Goirigolzarri retired as Chief Executive of BBVA, Spain’s second largest bank (also rumoured to be interested in entering the British market) in 2009 he took with him a pension pot reported to be in excess of €50m.

Aged 55 at the time of his retirement, ‘Goiri’ as he was known in the bank, left looking forward to an estimated pension in the region of €3m.  That is €3m every year, for life.

But even these sums are dwarfed by others in the Spanish banking world.   According to Bloomberg, the CEO of Santander has a pension pot waiting for him of some €80m – which is only slightly less than that of BBVA’s Chairman, Francisco Gonzalez.

This is four times greater than the pension fund for Stephen Green who left HSBC to become a Trade and Industry minister and 20 times more than Deutsche Bank’s chief Josef Ackermann.

Perhaps that was why angry German institutional investors called “halt” on Gonzales’s ever ballooning pot about 18 months ago. Even more upset are the “indignados” who give voice to the young unemployed in Spain and as the Spanish economy deteriorates the rewards to the Spanish banking elite are now attracted attention as never before.

Bankers are quick to issue the veiled threat that theirs is a global industry which can relocate with ease. Some banks seem to think that because they are already based outside the UK, British customers will not notice or care about salaries, bonuses and pensions they award themselves.

But retail banking depends on customers like us: we too can move our money and accounts. It’s difficult, time consuming and bureaucratic, but in the end if we really don’t like the bonuses, we have some power.

Ed Miliband spoke for the majority last week on RBS and David Cameron had nothing to say. The next important step is to develop the concrete policies which show how Labour can help empower British customers to take action ourselves in tackling this runaway bank bonus culture across any bank where we hold funds, regardless of nationality.

David Mathieson is Chair of Labour International, the “CLP” for the 800 Labour members who live overseas.

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One Response to “Angry with RBS? Take a look at the Spanish bank bonuses that British customers are helping fund”

  1. swatantra says:

    But where else can these customers go?
    The Co-operative Bank/Smile is the only ethical Bank on the Hight Street and people should direct their accounts there; Smile is their Internet Banking arm.

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