Royal Bank of Scotland PLC Chief Executive Stephen Hester lashed out at "political interference" in the partly nationalized bank as shareholders met to approve its participation in a government asset protection program on Tuesday.
Still, bank shareholders gave formal approval to the bank's participation in a program that will let it offload shaky assets, part of the British government's massive efforts to shore up the country's banks after huge losses from the world financial crisis.
RBS has been subjected to a British government-imposed cap on bonuses and a forced sell-off of assets by European regulators since it accepted a multibillion taxpayer-funded bailout at the height of the financial crisis last October.
Hester, who has complained that the curbs on bonuses will restrict RBS's ability to find and retain workers needed to return it to profitability, said Tuesday that more than 15 billion pounds ($24 billion) has been wiped off the value of the government's 70 percent stake because of a related drop in RBS' share price.
"The potential for conflict of having the government as a major shareholder is clear and sharp," he said. "Political interference has damaged our share price over the last few months."
Hester added that key staff had been lost because of the restrictions, which would impact on profit at the bank this year.
"Some pockets of our business such as private banking have lost staff. This has damaged our share price and damaged our shareholders, it is damaging, but containable," he said. "This is why we would love to be out of the political limelight as soon as possible."
However, Chairman Philip Hampton attempted to play down disagreements with the government, denying reports earlier this month that the board had threatened to resign over the bonus issue.
Britain's Treasury has demanded the right to veto bonuses as part of RBS' participation in the its asset protection program to insure bad debts.
"We act like a cabinet, but there were some people who felt more strongly than others, but there were no threats of a mass resignation," Hampton said, while adding that the board intended to formally challenge the government's position.
"We suggest the board keeps control of bonuses," Hampton said. "We will go through the extra loop of seeking permission from the Treasury."
Shareholders at the bank formally approved its particpation in the asset protection program at Tuesday's meeting, allowing the bank to shunt off 282 billion pounds ($457 billion) in bad debts.
Hampton said that the bank was at risk of full nationalization it it did not take part in the program.
"The APS provides important additional protection in case of prolonged or severe economic downturn," he said. "We appreciate the steadfast support of the government."
The meeting at the bank's corporate headquarters on the outskirts of Edinburgh comes a day after EU regulators approved the 20 billion pound state bailout of the bank, but also warned it needed to reduce its balance sheet further by 2013.
The EU said bank must ditch its insurance operations and commodity trading to compensate for the competitive advantage it gained from the bailout.
AP Business Writer Jane Wardell contributed to this report from London.