Bonuses are needed – taxpayers must accept it

I can understand that the public is incandescent with rage over the reckless and incompetent manner in which Fred Goodwin and his team took RBS to the edge of the abyss in 2008, I really can.

The taxpayer is understandably in an unforgiving frame of mind and is intolerant of any perceived over-indulgence. But let's remember this: Stephen Hester never asked for the job as chief executive. It was the Treasury and the last government that begged him to drink from this poisoned chalice.

Political expediency and public pressure persuaded Mr Hester to waive his £1m bonus in January last year, even though he was doing an excellent job. He had cut down the balance-sheet size, by dispensing with assets, from £2.2 trillion to £1.5trn – no mean achievement in a buyers' market. But he nearly threw in the towel – and who could have blamed him in the face of such vituperative and venomous bile?

Transgressions involving Libor manipulation and PPI mis-selling have not gone undetected. But many of these misdemeanours, though never to be condoned, are historical. After 2008, many employees at RBS's treasury department made huge contributions to alleviating the massive losses – the £24bn that was reported in 2008 could have been much worse.

These contributions can be achieved only with quality operators, and such people require, their contracts entitle them to, and they are duly paid, bonuses for their work. The bonus culture since 2008 has changed dramatically, both in the manner and the amounts distributed. In 2010, RBS paid £937m in bonuses. This year, while RBS is in the process of running down its investment-banking operation, it will be shelling out £250m to 11,900 employees.

I put it to the taxpayer: do you want your money back? If so, accept the realities of life. Banks are competitively international. Their key staff need to be retained. This requires sensible bonuses. Accept that fact!

The writer is a market commentator for Cantor Index