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For RBOS the goose that laid the golden eggs has left the building
Chancellor Alistair Darling announced over the weekend that banks that failed as badly as RBOS failure should be disallowed from awarding large bonuses, although he did concede that there should be some modest pay-outs for certain staff.
In an interview with the BBC Darling revealed that "no overall bonus figure has been agreed on" but was adamant that none of the bank employees directly associated with the losses should be rewarded.
Reports are that the potential total bonus figure for RBOS could reach as high as one billion pounds to be distributed amongst the bank's almost two hundred thousand staff. Expectations are that an investigation into the Bank's management of the crisis and what led up to it is due to be held in the very near future and one of the main issues that will be dealt with is past and future bonus payouts. Although the one billion that is due to be paid out is fairly modest in relation to years in the past, the chancellor pointed out in his interview that " success should be rewarded and not failure'
Last month, RBOS announced that 2008 was a record loss year, with a deficit before write-downs of between seven and eight billion pounds expected to be announced.
He insisted that "absolutely no figure has been agreed" with RBS, adding that the bank wanted "to make sure they cut down these payments to the absolute minimum they have to."
"They have to understand that these banks would not be here but for the British taxpayers, therefore they have to show the degree of restraint that people would expect."
In general, representatives from across the political spectrum have pressed the Labour Government to impose embargoes on the bonuses paid out at financial institutions, especially among those who take unnecessary risks.
George Osborne, spokesman for the opposition Conservative party on Treasury matters, announced in a recent interview. “It is totally unacceptable for these large banks which have large tax shareholdings to pay large cash bonuses to their senior management.”
Despite his claims to the contrary, Alistair Darling has refused to accept a cap on bonus payments, saying the government had to take into account incentives for employees.
U.K. bankers have reaped more than 31 billion pounds in bonuses over the past four years, according to the Centre for Economics and Business Research.
On the industrial front, it was reported that manufacturing output in December declined at its fastest rate for almost the last thirty years, ample evidence that the fragile state of the UK economy was showing no signs of improvement .
According to the Office for National Statistics (ONS) manufacturing output fell by 10.2% from December 2007 figures , and for the last quarter of 2008, there was a fall of five percent from the comparative period in 2007, which was the steepest fall since the " winter of discontent in" 1974.
These frightening statistics, according to ONS meant the current UK recession could be even worse than first thought.
This theory was strengthened by information that the number of companies that went bankrupt in the fourth quarter of 2008 soared as the economy contracted by its largest amount since 1980, according to government figures issued on Friday. The Insolvency Service said the number of companies from across the business spectrum going into liquidation in the fourth quarter was 4,607, up 11.9 percent from the previous quarter and 51.6 percent higher than the same period the previous period.
The number of company administrations across England and Wales in the fourth quarter soared to 2,018 from 575 in the same period the year before. Through all of 2008, the number of companies who called in the administrators rose by 92 percent to reach 4,820.
At close of trade on Friday, the FTSE 250 index rose by +2.67%
or 170.52 at 6,561.67 while the FTSE 100 finished the session up +1.49% or 62.94 at 4,291.87.
Sterling rose slightly again against the dollar and the Euro and rose strongly against the Japanese Yen and the Swiss Franc:
- Pound/Japanese Yen 135.80
On Wall Street, things were buoyant on Friday where the Dow Jones index rose by 217,52 points to 8280.59 and the Nasdaq also soared 45.47 points closing at 1591.71.
Gold futures rose steadily before the weekend, as the Bank of England cut its key interest rate to the lowest level of 1%.
Gold's attractiveness as a safe haven and an inflation hedge has pushed its prices more than 3% higher this year, compared to a 6% decline in the S&P 500 equity index and a 5% loss in the Reuters/Jefferies CRB commodities index. Holdings in the largest exchange-traded fund backed by gold hit a new record Wednesday.
In Thursday trading, gold for February delivery rose $12, or 1.3%, to end at $913.60 an ounce on the Comex division of the New York Mercantile Exchange. The February contract expires Feb. 20, with open interest, or the total amount of outstanding contracts, remaining at 351,400 ounces as of Thursday.
Wall Street has had another big rally as investors bet the government will take some big steps to help the economy. All the major indexes rose more than 2 percent Friday, including the Dow Jones industrial average, which rose more than 200 points as investors looked past another bleak jobs report and awaited word from Washington about an economic stimulus plan and changes to the government's financial rescue program. Financial stocks led the market as investors also awaited the government's latest revisions to its lifeline for banks. Treasury Secretary Timothy Geithner is expected to announce the changes in a speech on Monday
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