Wall Street (From The Northern Echo)

Wall Street

2:14pm Friday 10th February 2012 in Letters

THE news that the RBS chief Stephen Hester had “some deeply depressing moments” during the furore over his proposed bonus is enough to reduce even the most hardhearted person to tears of uncontrollable laughter. I trust that his £1.2m annual salary averts the need for expensive psychological help.

What is the complicated task facing Mr Hester and warranting such huge reward?

Until recently, banks worked on pretty simple arithmetic formulae. For every £1m deposited by people, ten per cent was kept in cash to ensure the needs of customers were always satisfied. A further 20 per cent was loaned to government and business on a short term, threemonth, basis.

A further 50 per cent was loaned to private and business customers. These advances were made and approved by local bank managers with at least 20 years’ experience of their craft. The rest was invested in subsidiaries and the banks’ own premises.

Throughout the 20th Century no major clearing bank in England went under until Mr Hester’s generation of slick movers took over and turned this central pillar of the economy into a casino, resulting in the greatest recession for a century.

And the task facing the bank bosses now is simply to return to the simple model. It does not warrant huge bonuses, just a little common sense. Get on with it and stop moaning.

Rob Meggs, Hartlepool.