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UK government to cave in on banking bonuses

The UK government looks set to cave in on banking bonuses in excess of £1.5 billion for majority-owned Royal Bank of Scotland with the board of the bank threatening to resign if the UK government blocked the bonus pool. The head-to-head between Royal Bank of Scotland and the Treasury has given hope to other banking institutions which are under pressure to reduce their bonus payments in the short to medium term. So has the UK government lost control?

In many ways the UK government and the UK regulators have never had control of the UK banking sector which is to all intents and purposes leading the UK economy and leading the government. Despite the various headlines in the press suggesting that banking bonuses will be reined in and salaries will be subdued in the short to medium term, in reality this is not going to happen. The government has invested billions upon billions of taxpayer's money into the Royal Bank of Scotland and a reduction in bonus payments would see highly sought after staff leaving the operation thereby reducing the overall value of the business.

The UK government is stuck in the middle with a potential conflict of interests, a situation which many people had foreseen but the UK government appears to have ignored.

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