Just how much does a chief executive need to get out of bed in the morning? In the case of Stephen Hester, the chief executive of Royal Bank of Scotland, it is £9.6 million.

RBS has come to embody all that was wrong with British banks. Its old masters were insufferably arrogant while also making the biggest mistakes. Having gorged on subprime debt and the disastrous acquisition of ABN Amro, RBS crashed to a £24.1 billion loss last year, forcing a £20 billion taxpayer bailout of the lender.

The long hard journey out of the devastation will mean thousands more job cuts on top of the 7,000 already announced, and many individuals and small businesses will find it impossible to get a loan at a reasonable rate from RBS as it struggles to return to profitability.

So it might seem almost unbelievable that in the middle of this destruction, the bank has been spending weeks talking to its shareholders about how to improve Mr Hester's pay package over the next three years.

In a deal that is set to be signed off by RBS's board today or tomorrow, the total value of Mr Hester's package could rise by about £3 million to a total of £9.6 million, with £6.4 million of that paid out for his performance over three years.

The figures might make customers and employees furious, but if handled correctly, it should not. RBS's shares were trading at 38p this morning. For Mr Hester to receive all of the payout, RBS's shares would have to rise to 70p.

It is very difficult to predict what is going to happen to banks' shares over the next few years as some believe that financial institutions are not out of the crisis while others are growing in confidence that the worst of the economic downturn is over.

Either way, a rise in RBS's shares to 70p would be good news for the taxpayer, and for the business. The Government took a 70 per cent stake in RBS at about 50p a share. If the shares rise to 70p, the Government will be sitting on an £8 billion profit.

The Treasury is very keen to sell back its stakes in RBS and Lloyds Banking Group — where its holding is 43 per cent — to the private sector. To be able to show that it has made several billion pounds in profit from the investments which were taken to avert collapse of the banking system would not only be a huge political coup for Gordon Brown. It would also be good for Britain's strained public finances.

The issues of danger are how much Mr Hester gets in partly up to the discretion of the board. Directors need to be very tough about ensuring that he really does meet his targets. But really it is down to Mr Hester. He is running out of time to continue to blame RBS's old management for the bank's problems. From now, the City will be judging him by the promises he has made for returning the bank to health.

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