The boss of the beleaguered Royal Bank of Scotland has revealed there may have been "leakage" of taxpayers' money to help pay bonuses to bankers.
RBS boss Stephen Hester explained the funding detail while responding to questions from the Treasury Select Committee over the failure of banks to hit lending targets agreed earlier this year.
Mr Hester conceded the "leakage" from taxpayer support may have gone into the bonus pool.
He also refused to support proposals to ring fence different banking operations and warned that the move could create more risk in the industry.
He was being grilled over plans detailed by the Independent Commission on Banking (ICB) to separate the retail arms of UK banks from the riskier investment banking divisions.
Mr Hester told the Treasury Select Committee he could not give "black and white answers" when asked if he backed the move, and warned: "Creating a ring fence increases some of the systemic risk and decreases the ability of banks to withstand the risk and has significant costs."
But Mr Hester was joined in giving evidence by HSBC chairman Douglas Flint, who said a ring fence was required - although he would prefer it if there was not one.
The Government commissioned the ICB report, which will be published in full in September, to review ways of avoiding "too big to fail" banks sparking another credit crisis.
Earlier, Business Secretary Vince Cable told MPs the Government is prepared to increase taxation on UK banks if they fail to back small businesses.
Mr Cable was asked to address fears that the UK's top five banks are failing to do enough to meet lending targets as set out under the Project Merlin agreement.
Addressing the Business, Innovation and Skills Committee, Mr Cable said: "The Chancellor and Prime Minster have made it clear that if we don't get results, they have said we should take further action with tax on banks."
Mr Cable acknowledged there was a "serious problem" with lending to small and medium sized enterprises (SMEs) but said there was a "mixture of factors" behind this, including low demand for new lending.
The Project Merlin agreement, unveiled in February, followed protracted talks between the top five banks and the Treasury over key issues such as bonuses and lending.
RBS boss Stephen Hester explained the funding detail while responding to questions from the Treasury Select Committee over the failure of banks to hit lending targets agreed earlier this year.
Mr Hester conceded the "leakage" from taxpayer support may have gone into the bonus pool.
He also refused to support proposals to ring fence different banking operations and warned that the move could create more risk in the industry.
He was being grilled over plans detailed by the Independent Commission on Banking (ICB) to separate the retail arms of UK banks from the riskier investment banking divisions.
Mr Hester told the Treasury Select Committee he could not give "black and white answers" when asked if he backed the move, and warned: "Creating a ring fence increases some of the systemic risk and decreases the ability of banks to withstand the risk and has significant costs."
But Mr Hester was joined in giving evidence by HSBC chairman Douglas Flint, who said a ring fence was required - although he would prefer it if there was not one.
The Government commissioned the ICB report, which will be published in full in September, to review ways of avoiding "too big to fail" banks sparking another credit crisis.
Earlier, Business Secretary Vince Cable told MPs the Government is prepared to increase taxation on UK banks if they fail to back small businesses.
Mr Cable was asked to address fears that the UK's top five banks are failing to do enough to meet lending targets as set out under the Project Merlin agreement.
Addressing the Business, Innovation and Skills Committee, Mr Cable said: "The Chancellor and Prime Minster have made it clear that if we don't get results, they have said we should take further action with tax on banks."
Mr Cable acknowledged there was a "serious problem" with lending to small and medium sized enterprises (SMEs) but said there was a "mixture of factors" behind this, including low demand for new lending.
The Project Merlin agreement, unveiled in February, followed protracted talks between the top five banks and the Treasury over key issues such as bonuses and lending.
John
"My lovely car now sold onto a very happy new owner.
I still love this marque and I will still be around, preferred selling to breaking, as a great runner and performer"
"My lovely car now sold onto a very happy new owner.
I still love this marque and I will still be around, preferred selling to breaking, as a great runner and performer"
