Instead, it has set up UK Financial Investments, to run its shareholdings at arm's length.

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The most important shareholder is UK Financial Investments, which looks after taxpayers' 41% stake in the bank.

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"Hester's pay reflects the significant contribution he has made towards rebuilding RBS in 2011, " UK Financial Investments (UKFI) told BBC business editor Robert Peston.

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Currently, Sir Philip is chairman of UK Financial Investments, the company established to manage the government's shareholding in banks subscribing to its recapitalisation fund.

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The involvement of Glen Moreno chairman of Pearson, which part-owns The Economist in UK Financial Investments, which manages the government's new stakes in Britain's banks, has been undermined by his association with secretive Liechtenstein.

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Mr Cable said UK Financial Investments (UKFI), which was set up to manage taxpayers' shareholding in the banks, should make it clear that their principal duty was to provide capital to the British economy and to British companies.

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