Bonuses in the financial services sector have got out of control in recent years, Prime Minister David Cameron said on Thursday, adding cash payments at state-backed banks would again be limited to 2,000 pounds.
Cameron also confirmed the government would next week set out detailed proposals on curbing executive pay, a sensitive issue in Britain where unemployment is rising and pay rises for most are lagging inflation.
He was asked about a report in the Financial Times that Royal Bank of Scotland Chief Executive Stephen Hester would get a bonus of between 1.3 million pounds and 1.5 million pounds in the forthcoming payments round.
The state has an 83 percent stake in RBS after it was bailed out by taxpayers.
For our part, as major shareholders in the business, let me say we will be repeating what we did last year and restricting the cash element of bonuses in all state-owned banks to 2,000 pounds, Cameron said.
He added the bonus payment for Hester had not been decided, echoing comments from the bank.
The state also owns 40 percent of Lloyds Banking Group after it too was bailed out under the previous Labour government during the 2008-09 financial crisis.
Cameron has been a staunch defender of Britain's financial services industry which still contributes more than 10 percent of GDP.
He refused to sign an EU treaty last month because he feared it could damage the industry, a mainstay of the London economy.
However, the coalition is aware of public concern over what Britons regard as excessive rewards for bankers, who helped cause a financial crisis that is driving down living standards for the majority.
There should be a proper, functioning market for talent at the top of business. And that will inevitably mean some people will earn great rewards, Cameron said in a speech.
But that is a world away from what we've seen in recent years where the bonus culture -- particularly in the City (of London)-- has got out of control.
As the Governor of the Bank of England (Mervyn King) reminded us this week, excessive bonuses reduce lending to small businesses.
(Reporting by Matt Falloon; writing by Keith Weir)