Treasury calls for control of RBS bonuses
0 Comments | Yorkshire Post (Leeds, England), Dec 2, 2009
As part of the terms of its deal to insure bad debts, the Government wants to dictate both the “quantum and shape” of the payouts at the bank for 2009.
It is understood that institutional investors have raised concerns about RBS’s ability to operate competitively after the move, which would give the Treasury a veto over the size and terms of bonus payments.
It is thought RBS will now have to agree the size of this year’s payouts with UK Financial Investments (UKFI), which manages the public stakes in banks.
RBS, which will be 84 per cent state-owned under the terms of the Asset Protection Scheme (APS), has already agreed to limit cash bonuses to those paid under A[pounds sterling]39,000 a year, with higher earners paid in shares over three years.
The bank has already put aside A[pounds sterling]1.79bn in the first half of this year to cover staff expenses, including salaries and bonuses.
The recent rebound in stock markets has led to bumper investment banking hauls so far this year and the sector is estimated to be preparing to fork out a 50 per cent hike in annual windfalls to A[pounds sterling]6bn.
RBS’s global banking and markets division, which employs around 20,000 people, is looking set for a record year.
This division alone is thought to have set aside an estimated A[pounds sterling]1bn in staff payouts last year.
The bonus clampdown provides a challenge for RBS, as remuneration is key in the banking sector to attracting and retaining top staff.
Stephen Hester, chief executive of RBS, has referred to payment restrictions as “additional obstacles that makes our job of recovering money for the taxpayer more difficult”, but said he understood why it was being done.
Suggestions that the Government would step in to limit this year’s bonuses met with concern from shareholders.
It is reported that investors, backed by the Association of British Insurers (ABI), were worried that RBS would lose staff and find it difficult to attract new applicants.
One said that the move was “wholly political”.
Peter Montagnon, ABI director of investment affairs, said he wanted RBS to negotiate reasonable settlements for employees who had performed well.
“It would not be acceptable to yield to the short-term wishes of one shareholder if this means sacrificing value for all,” he said.
RBS is understood to have agreed the deal only to repair its balance sheet.
The firm said that the requirement “may adversely impact” on its ability to retain key staff, depending on the result of negotiations with UKFI.
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