Bonuses for investment bankers at part-nationalised Royal Bank of Scotland will be "the minimum we can get away with", the group's boss said today.
Chief executive Stephen Hester ducked MPs' questions on the planned level of payouts, saying it would be "irresponsible" to reveal estimated figures.
He told the Treasury Select Committee that he was "not going to pay a penny more than we need to", amid mounting concerns over payouts ahead of the US bank reporting season, which starts with JP Morgan Chase on Friday.
Wall Street is expected to hand out multibillion-dollar bonus pots and there are fears that UK banks will come under pressure to follow suit.
Mr Hester admitted that RBS - now 84 per cent owned by the taxpayer - was "prisoner to the marketplace", but said windfalls would be minimal when revealed at the end of February.
"It is my duty as chief executive to protect shareholder interests and pay the minimum bonuses that our group can get away with - consistent with motivating and keeping good staff," he said.
The Commons hearing heard that the restructuring at RBS was well-ahead of expectations, with Mr Hester confirming targets for the Government to begin offloading its stake within three to four years.
Its balance sheet has already reduced by two thirds - with £500bn of assets now gone - and the major recapitalisation moves to strengthen finances already completed.
But RBS is set to miss Government targets on lending to UK businesses, blaming a lack of demand among recession-hit firms.
Northern Rock head Gary Hoffman and Eric Daniels of Lloyds Banking Group also appeared before the committee. The taxpayer owns all of Northern Rock, the majority of RBS and a 43 per cent share of Lloyds.
RBS is under particular scrutiny over the payouts expected in the bank's investment banking division, with outrage at the prospect of huge bonuses at a bank saved from collapse by state support.
The group has benefited from a sector-wide bounce back in 2009 as investment banks have boomed due to the collapse of competitors such as Lehman Brothers and Bear Stearns, low interest rates and a raft of fundraising deals.
Committee member Nick Ainger said bankers at RBS had "won their jobs and now they've won their bonus too" thanks to taxpayer bailouts.
But Mr Hester - who is himself said to be on a potential £9.7 million pay and bonus package - said bonuses were a "lose/lose subject" for the industry and refused to be drawn on what, if any, bonuses would be paid out.
They would be calculated over the next two months looking at the group's profit and loss, whether an individual achieved their targets and also the market rate.
Tensions are said to be running high within government over RBS bonuses.
But Mr Hester denied reports last month that the board of RBS threatened to resign en masse if the Government intervened to cut its bonus pool, saying "legalese" within conditions on its participation in the Government's Asset Protection Scheme had been misconstrued.
RBS's inclusion in the toxic asset insurance scheme saw the Government's stake increase from just over 70 per cent to 84 per cent, but Mr Hester sought to assure that improving market conditions meant it was unlikely the bank will need to call on it.
"I hope that within the next three to four years, we'll be able to exit the scheme altogether without having used it," he said.Reuse content