The Royal Bank of Scotland, which received a £20bn bail-out with taxpayers’ money, is to proceed with a £1bn payout in annual bonuses.
This is despite Chancellor Darling saying he ‘understands people feel angry about excesses of bank bonuses and that directors have a duty to behave responsibly’.
RBS said it would proceed with the payout as it had contractual obligations to executives for £500m and £500m is discretionary.
The bank’s board has begun discussions about the bonuses with UK Financial Investments (UKFI), the body set up by the Treasury to manage the government’s shareholdings in banks.
RBS has claimed that no individual banker will receive a bonus with a cash element of more than £25,000, with the remainder of the bonuses, to be paid next month, in RBS shares.
The bank said it has decided it will not pay any bonuses to employees who work in loss-making areas of the business.
Darling announced yesteray that the Treasury is to order an independent investigation into how banks are managed.
The review will also examine the pay and bonuses of top executives.
Asked about the RBS bonuses on the BBC’s Andrew Marr Show, he said that ‘no-one who was associated with these large losses, this excessive risk-taking, should be allowed to walk away with big cash bonuses and I’ve made that very clear to the new Chief Executive of RBS’.
However, he added that ‘there’s nothing wrong with a bonus system that rewards success’.
Asked if he could do anything about curbing bonuses, Darling said that ‘obviously there are contractual problems with some staff’.
He added that ‘no figure’s been agreed and you know I’ve made it clear that in respect of the people who got these banks into trouble in the first place – the people who’ve taken excessive risks, the people who actually were the authors of their misfortune and by extension everyone else’s – they shouldn’t be rewarded for that.’
He was asked did he agree with US President Obama’s proposal for an ‘absolute cap’ on salaries for banks that have had to be taken over by the government?
Darling said: ‘Up to a point. . . You know you do need to make sure you’ve got incentives for people who actually make the difference between a bank working and not working.’
He called on RBS ‘to show a degree of restraint that people would expect’.
Meanwhile, it has emerged that the Treasury’s asset guarantee scheme to ring-fence ‘toxic loans’ made by British banks is likely to risk more than £400bn of taxpayers’ money.
This follows submissions from RBS and discussions with Lloyds Banking Group.
Barclays, which is also likely to participate in the asset protection scheme, has drawn up plans to pay bonuses of about £600m.
