Hester considered quitting over bonus row

Stephen Hester has admitted he considered stepping down during the political storm caused by his £1m bonus.

The Royal Bank of Scotland (RBS) chief executive said he had “underestimated” the furore the bonus would cause. Hester said it was vital to defuse the “timebomb” of the bank’s balance sheet to benefit the taxpayer, who has an 83 per cent stake in the bank.

Speaking on BBC Radio 4’s Today programme, Hester said: “In the end, I came to the conclusion that it would be indulgent for me to resign.”

Hester said he waived the bonus, which would have been paid in bank shares, because it was damaging for the bank.

“I took the judgment that it was going to be damaging for RBS to stay in the intensity of the spotlight that we had got into,” said Hester.

Although Hester said he had “great sympathy and understanding” for those concerned about high remuneration in the banking industry, he said it was up to politicians to deal with such “societal issues”.

RBS needed to be able to hire the best people to solve the problems it had inherited from the former management which had resulted in the bank being bailed out, Hester said.

“When I was asked to take on this job three years ago, I had to replace the whole senior management team of RBS,” he said.

“We had to go around the world looking for the best people, not just people to run a bank well, but people to defuse the biggest timebomb in history in terms of bank balance sheets.

“Those people are doing a good job. I think they deserve recognition. If they do a good job, it is our task to make sure that there is a connection between the job people are doing and how they get treated.”

Hester accepted that bank bonuses were controversial but said the bank did not realise what a row would erupt when his award was revealed.

“I understand why these issues are controversial - particularly in a time of austerity. Of course, we underestimated that, going forward,” he said.

The RBS boss said the banks had been guilty of “hubris” after 20 years of “unbridled expansion” before 2008’s crash.

He said: “I think in the case of the banking industry there was over-confidence and, with the benefit of hindsight, over-rewards.”

But he said the sector should not be demonised because it is still essential to the economy.

“Let’s not demonise a whole industry. Let’s not demonise something that is fundamental to the world economy,” Hester said. “Banking is important, financial services is important. It supports the economy, it supports millions of jobs and we need to remember that.”

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