THE issue of executive pay cropped up at a shareholder event hosted by Royal Bank of Scotland owner NatWest Group last week – and strangely it was not in the context of excess.

Whereas once the banking industry was synonymous with greed, certainly in the years following the financial crisis, this time the question was about whether the pay on offer at NatWest was generous enough to attract the best talent to its top executive posts. From the observer’s standpoint, it seemed a noteworthy moment in the evolution the state-owned bank has undergone in the last decade.

For many years after its £45.5 billion bailout by UK taxpayers at the height of the financial crisis, RBS, as it was then known, seemed to lurch from one crisis to another, as often grisly details of corporate excess at the bank, including the awful treatment of some customers, emerged.

That noise has quietened down as the balance sheet at the lender has been steadily cleaned up, often at the expense of quite eye-watering losses. But what has also occurred over the last decade has been a comprehensive retrenchment of its operations, which appears to show no signs of slowing.

It was against this backdrop that the question posed last week, namely whether the bank’s remuneration policy enables it to attract high-quality candidates, seemed particularly interesting. The chairman of the remuneration committee, Robert Gillespie, framed his response to the question in the context of the appointments of chief executive Alison Rose and chief financial officer Katie Murray. Both were internal appointments, with Ms Rose rising to the top job having first joined NatWest as a graduate in 1992. Ms Murray was appointed CFO in January 2019, following her arrival from Old Mutual Emerging Markets in November 2015.

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Mr Gillespie defended the bank’s remuneration policy while rejecting any inference that it had somehow not been appealing enough to attract external candidates as NatWest conducted its searches to fill the roles. “The outcome of both processes was because we felt that the two internal candidates were the best candidates in every respect,” he said, observing that “high-quality candidates” had been in the mix as it assessed internal and external contenders.

Mr Gillespie was certainly right to defend the pay policy, given the level of remuneration on offer. NatWest’s most recent annual report shows Ms Rose received total remuneration of £2.6 million for 2020, including a base salary of £1.1m. The bank announced in April of last year that Ms Rose would forgo 25 per cent of her fixed pay for the rest of the year in response to the coronavirus crisis, which was achieved through a reduction of £426,078 to her fixed share allowance.

Ms Murray received remuneration totalling £1.6m for 2020, including a base salary of £750,000.

On the basis of such figures, the pay earned by the bank’s two most senior executives is certainly extremely attractive compared with average salaries, and of course will reflect the level of skills and experience Ms Rose and Ms Murray bring to their respective roles.

It was interesting, though, that one investor saw fit to question whether the bank is stumping up enough to ensure it is capable of attracting the best talent.

On the one hand, the bank can’t win. Given that it continues to be majority-owned by UK taxpayers, its remuneration committee has to put together a package, say for its chief executive, that is commensurate with the demands of the role and is competitive in the market, without being excessive.

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The £2.6m Ms Rose received for 2020 fell well short of the total remuneration of £3.44m received for 2020 by her counterpart at Lloyds Banking Group, Antonio Horta-Osorio, who is poised to leave the Bank of Scotland owner. In this context, though, it is perhaps worth observing that Lloyds returned fully to private hands in May 2017, having been as much as 43%-owned by taxpayers following its £20.3bn bailout amid the financial crisis. NatWest, now nearly 60%-owned by taxpayers, still has some way to go in this regard.

It is also the case that the bank presided over by Ms Rose is considerably smaller than it was a decade ago, and is continuing to contract. Last month, the bank sold off the investment management arm of its private bank Adam & Company, which came after it announced in February that it would be withdrawing its Ulster Bank business from the Irish Republic.

This followed dramatic moves to scale down NatWest Markets, the bank’s investment banking operation, and, in the years following the bailout, the major sales of US bank Citizens and Worldpay, the payment processing business.

Of course, NatWest remains a major bank in UK terms, and a big supporter of Scottish jobs, businesses and households. But perhaps the simple reality is that the remuneration it now offers reflects the fact it is simply not as big as it once was.