Royal Bank of Scotland chief executive Stephen Hester revealed to the MPs yesterday that the bank permits 90 per cent of mortgage applications, and it had to pay bonuses to stop bankers from leaving for higher rewards at rivals.

The revelation has cropped a controversy over the City pay, reporting fresh calls for a break-up of the big banks yesterday.

Major Wall Street banks are poised to reveal their bonuses in the next fortnight. They are expected to show little restraint, despite the taxpayer having bailed out the banking system.

The Treasury has a power to veto bonuses at the bank under the terms of its insurance for £282bn of the bank's troubled loans, through the asset protection scheme (APS).

Hester claims that imposing government's 50% tax on bonuses would not trigger any spark in the City and emphasized that he hoped the taxpayer would get out of its shareholding at a profit.

"The best way to deal with bonuses and achieve a fair deal for the taxpayer, who guarantees these institutions, is to split the banks up", cited Vince Cable, the Lib Dem Treasury spokesman.

Hester poses his confidence amidst claims that RBS had gone beyond the level expected in comparison to any other bank to reform its bonus system, paying more in shares and having methods to grab bonuses back.