Royal Bank of Scotland has been told by the government it will not be able to grant bonuses worth more than the salaries of its employees after the Treasury said it had blocked an application by the taxpayer-backed lender to hand out awards of up to 200% of base pay.
In a statement, RBS said it had been informed by the UKFI that any application at its upcoming annual shareholder meeting to award bonuses worth twice an employees fixed pay would be blocked, effectively ending any hope of getting the measure through.
RBS said:
“The board believes the best commercial solution for RBS is to have the flexibility on variable to fixed pay ratios that is now emerging as the sector norm. This would also allow RBS to maintain the maximum amount of compensation that could be subject to performance conditions including claw back for conduct issues that may emerge in future,” said RBS.
A spokesman for the Treasury said:
"In the case of Lloyds, it has largely completed its restructuring. It is majority private-sector owned and the government’s shareholding in the bank is now down to less than a quarter. Reflecting these different circumstances, the government will use its shareholder stake to support setting the bonus cap at the maximum allowable ratio of 2:1, in line with all other majority privately-owned banks."
"We have made clear: there will be no rise in the bonus cap for an RBS still in recovery; but a bonus cap at Lloyds that reflects the progress it has made in getting money back for taxpayers. A few years ago, bonuses were out of control, banks needed bailing out and the economy was shrinking. Under this Government's long term economic plan bonuses are down, the banks are recovering and the economy is growing."
Treasury bans big bonuses at RBS
RBS has become the first British bank to be told it will not be able to pay the maximum bonuses allowed under the incoming EU cap.
Related topics: Finance News
Amy Loddington
25th April 2014
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