Royal Bank of Scotland to realign cost base

Stephen Hester, the chief executive of Royal Bank of Scotland, has this week confirmed that the company will be paying staff less than their rivals. While this has been welcomed by those dismayed at the amount of money paid to the company's highflying staff it may well have a detrimental impact on the company's future performance. How can Royal Bank of Scotland survive in the cutthroat world of finance if it is unable to attract the best brains in the business?

The truth is that the finance sector is a very high pressure and high-profile arena of the UK economy. Not only has the sector attracted the best financial minds in the UK but many overseas financial experts have been attracted to the UK market because of the exceptional salaries available and potential bonuses. While the public may well appreciate a reduction in the company's cost base, in the longer term there is a danger that the calibre of staff could be reduced which would eventually impact upon the company's profile and profitability.

This is something of a double edge sword, do you invest into the company with the intention of attracting the best minds in the financial world or do you cut back on short-term investment, let the company settle down and then rebuild? The obvious danger here is that by downsizing the operation and reducing staff payments the company could fall well behind its UK and overseas peers.