RBS Shake-Up Has Cost $60.5 Billion So Far

Stephen Hester has revealed that the dramatic restructuring of Royal Bank of Scotland has cost 38 billion pounds ($60.5 billion) in a rallying memo to staff days after the embattled chief executive waived a 1 million pounds bonus.

The Royal Bank of Scotland Headquarters
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The Royal Bank of Scotland Headquarters

Urging employees to “prove the critics wrong”, Mr. Hester provided a stark reminder of the difficult task he faces in cleaning up the bank after its 45 billion pounds government bail-out three years ago.

The 38 billion pounds charge includes the loan losses, disposal costs and restructuring charges the bank has taken sinceits near collapse in 2009. People close to RBS estimated that the final restructuring bill could surpass the price paid for the government’s 83 percent stake.

Mr. Hester highlighted the cost for the first time as he sought to boost morale among staff following the recent bonus dispute.

“There is no doubt that our position in the spotlight makes the job harder,” he wrote in an email. “But the best way to deal with it is to prove the critics wrong.”

His comments came as banks were preparing to make a concession in the battle for greater disclosure on pay by agreeing to reveal the remuneration of up to eight of their highest earners before new disclosure rules take effect this year.

Last year the UK’s biggest banks were each forced to disclose the pay of their five top executivesoutside the boardroom as part of the “Merlin” agreement with the government—but there is no such disclosure deal this year.

The Treasury is proposing permanent rules that will require each bank to provide pay details of eight top executives outside the boardroom. However, these requirements will not be finalized in time for the 2011 annual reports, due to be published next month.

Conscious that last year’s heightened disclosure on pay fuelled public and political fury over bankers’ bonuses, some banks were considering delaying the controversial pay disclosure until the new rules were implemented.

At Barclays , for example, the new requirements forced the bank to reveal that its top two investment bankers, Rich Ricci and Jerry del Missier, each took home more than 40 million pounds in 2010.

However people close to the banks signaled that they were unlikely to take advantage of this loophole. They said they were likely to maintain at least the same level of transparency as last year—and may go further.

“The direction of travel is clear,” said an executive at one of the big banks. “I would be surprised if banks tried to slide back on this.” Another conceded: “It is clear that the top eight will be required. We will do as much as we can.”

The Treasury said: “Any assertion that this year will see less transparency for senior executives is wrong.”