Royal Bank of Scotland and the Government are said to be close to patching up their differences over bonuses, with the state-owned bank conceding it will show restraint when deciding the size of the staff bonus pool.
An RBS source said at the weekend: "No decisions have been taken on the amounts to be paid but there will be many discussions over the next few weeks. We don't take any final decision until February but there's no question of us paying staff huge amounts, not in this climate."
The RBS climb-down follows a tense week of public recriminations over fears that it wanted to pay its investment banking staff up to £1.5 bn in bonuses and veiled threats from the board that it would resign if it could not pay enough to retain top staff.
But another RBS source said that a co-ordinated walk-out would be against Financial Services Authority regulations. However, some RBS directors are said to have become so frustrated that they felt their position might be untenable and sought legal advice.
The Chancellor, Alistair Darling, and the City minister, Lord Myners, have warned RBS – and all banks – that bonuses should be restricted. They also told UK Financial Investments, the agency that controls the Government's share-holding, that excessive bonuses could be vetoed, as a condition of signing up to the deal to insure £240bn in toxic assets.
RBS's chief executive, Stephen Hester, had feared that the Treasury might impose a zero bonus but this now appears to have receded. But further fire was added to the row when Lord Myners challenged shareholders to declare sides: "What I want to see is the major institutional shareholders coming out with statements on their attitude towards bonuses," he said.