'Darling' slashes RBS bonus's by 90%

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Darling slashes RBS bonuses by 90% 'to absolute legal minimum' | Mail Online



The Royal Bank of Scotland is to dramatically slash the bonuses it pays its staff, it announced today.

The amount paid out will be cut from the £2.5billion paid last year to £335million, the bailed-out bank said today.

The decision comes in the wake of huge public anger that bankers at RBS, which is now 70 per cent owned by taxpayers, were going to receive up to £1bn in bonuses.

But union leaders greeted today's sudden announcement by RBS with some scepticism.



'Cultural change': The new remuneration plans will see bankers repaid in bonds which can be clawed back depending on performance

TUC general secretary Brendan Barber said: 'Taxpayers who have bailed out banks do not understand why top bankers should get any bonuses at all.

'Irresponsible behaviour by banks is costing jobs in every part of the country and nearly every sector of the economy.

'Whatever the legal niceties, the real question remains: Why do bankers need bonuses to do their jobs properly when the rest of us are happy to put in a good day's work for a straight day's pay?'

The bank, which was bailed out with £20billion bail of public money, said there would be 'no reward for failure' as it announced the cuts.

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Alistair Darling said said that bonus payments will be cut to the 'absolute legal minimum'.

Future payouts would also take the form of bonds rather than cash, the Chancellor added.

Mr Darling said: 'People are understandably angry at the mismanagement at the top in some of these banks.

'The system that encouraged short-term behaviour has got to change.

'They have cut down the payments that they are making to the absolute legal minimum.'

He added RBS had carried out a 'fundamental look' at its system of remuneration in order to ensure it was 'better geared' towards the long-term needs of the bank.

'They get the payments over a period of years and they are subject to clawback if they don't come up to the mark,' he said.

'Fundamental look': Alistair Darling said RBS had reviewed its remuneration system and was cutting payments to the 'legal minimum'

The bank also announced a pay freeze this year for senior and U.S. staff, as well as those in its investment banking arm, the division that has been largely responsible for mammoth losses at the group.

Other staff will on average receive below inflation pay rises, added RBS.

It has also introduced an option to 'clawback' any of the non-cash awards made to staff for 2008 if losses arise from their activities.

The bank is now conducting a review of its pay and incentive policies, with more details due in its forthcoming annual report.

Mr Darling said the new system of bonuses represented a 'cultural change' within the bank.

'We have had the opportunity now to open the books, to go through what RBS is been doing,' he said.

'A huge amount of change has to take place in this bank and what you are now seeing is a cultural change in the way in which payments are made.'

Discretionary awards will be made in the form of interest bearing bonds to be issued in 2010, 2011, and 2012.

These will be cancelled if a banker's performance is not maintained or if he or she resigns from RBS. Once allocated, the bonds could be traded for cash or held.

The Government has been facing intense pressure to halt all bonuses at RBS and Lloyds Banking Group - the two banks bailed out by the taxpayer.

MPs across the political spectrum have argued that it is wrong for the banks which have taken public money to make bonus payments.

Giving evidence last week to the Commons Treasury Committee, RBS chief executive Stephen Hester said they could not ignore obligations as well as the need to retain their best staff.

The cash bonuses include around £175m to staff who had a contractural right to a payment. There is also an estimated £160m in payments to employees under a profit sharing scheme.

The announcement will now put pressure on the Lloyds - which includes the loss-making HBOS - to cut back its bonuses to the minimum,

Sir Philip Hampton, RBS group chairman, said: 'A fundamental reform to pay and reward is needed to reflect the reality of the situation the company is in.'

He added: 'We fully recognise, as a company, that we have to change materially not just the business we do but also the way we do business.

'Our overarching aim is to restore the standalone health of the Group as soon as is practicable.

'Our staff have had to contend with significant anxiety over recent weeks and months over a situation that the vast majority bore no responsibility for creating.

'We have tried, wherever possible, to focus the worst impact of the changes on our more senior staff and, in particular, those in the concentrated areas of our business responsible for the major losses recorded in 2008.'

RBS was one of the worst hit by the global financial crisis, recently warning its losses for 2008 could hit as much £28 billion, the biggest loss yet in UK corporate history.

Derek Simpson, joint leader of Unite, said: 'Unite welcomes the acknowledgement from the Government that staff at RBS, and across the financial services sector, are not the culprits of the financial crisis and must not face cuts in their pay packets in a desperate attempt to satisfy the hunger of the pack.

'To punish workers for the actions of senior bankers represents a demand for a pound of flesh from the wrong people.

'Staff are among the victims, not the culprits of the financial crisis. Our members at RBS are not, as is often suggested, the executives earning hundreds of thousands of pounds in bonuses.

'Many of the staff on the frontline of the financial services sector earn salaries as little as £12,000 per year.

'Union members rely upon the small annual bonus payment they have been promised to supplement their low income and pay their family debts.'