RBS defiant over £300m bonus pot
The state-owned bank claims it has to keep its investment bankers ahead of a share giveaway
Royal Bank of Scotland is set to defy a call from ministers to show restraint on pay and hand out as much as £300m in bonuses to its investment bankers.
The payout will be made despite the majority state-owned bank preparing to report a statutory pre-tax loss of around £4.4bn. RBS executives are expected to insist the bonuses are necessary to keep key staff as the Government considers a massive share giveaway to taxpayers.
One City source close to RBS said that retaining top talent was vital to get the stock price to a level that means people can make money if the Government pushes through with the idea of a massive share giveaway.
The source added: "If you want to create a market for those shares you have to have a business investors want to buy into, because a lot of people who are given the shares will sell them for the cash."
The bonus pool would have been bigger but for the need to meet part of the £390m in fines RBS was hit with over the role its traders played in the Libor interest rate fixing affair. That cost John Hourican, the head of investment banking, his job even though his division is expected to show a sharply improved performance in 2012.
But campaigners remain furious, citing the bonuses as an example of the City living in another world to the rest of the country.
David Hillman, a spokespman for the Robin Hood Tax campaign, said: "When scandal-ridden, bailed-out banks think it is OK to dole out millions in bonuses, it's clear the City still lives in an alternative reality to the rest of us.
"We must question where the Government's priorities lie when, despite the drive for austerity, it allows banker hand-outs to continue largely unchecked."
Stephen Hester, RBS's chief executive, who is on a £1.2m salary, has indicated that he will not turn down a bonus this year despite the Libor-fixing extending into his period at the head of the bank.
RBS will seek to draw attention to operating profit, which is expected to come in at around £3.5m, the best the bank has done under Mr Hester's leadership. That number comes before the inclusion of a string of provisions, including payouts for payment protection insurance mis-selling.
Lloyds also reports this week, with details of chief executive Antonio Horta-Osorio's new pay package likely to be announced alongside the annual results.
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