RBS furious at block on rewarding £1m bankers with double their salary
Shareholder bodies welcome sanction but fear banks will get round it with ‘allowances’
Royal Bank of Scotland bosses were left furious after the Government slapped down their attempt to pay their executives bonuses of twice their basic pay.
The EU’s bonus cap allows banks to pay employees 200 per cent of their salary only if a “super-majority” of two-thirds of shareholders agree.
But the bank was informed by UK Financial Investments (UKFI), which oversees the state’s banking interests, that it would vote against any such motion by RBS, forcing the bank to drop it.
The Treasury, which is thought to have forced UKFI’s hand, welcomed the move.
RBS, which still has 77 bankers on £1m-plus packages, will now be the only British bank with a 100 per cent bonus limit because UKFI will vote in favour of Lloyds’ bid to pay bonuses worth two times its top bankers’ salaries.
This is because Lloyds is seen to have largely completed its restructuring efforts and the state’s stake is now below 25 per cent after two successful share sales.
RBS bosses said the move to limit them to 100 per cent had left the bank facing “a commercial and prudential risk which it must try to mitigate”. That could see it paying some of the highest “allowances” most investment banks in Europe now offer to top staff. The allowances see bankers handed substantial monthly or quarterly payments to top up their pay. Because they aren’t linked to personal performance the “allowances” fall outside the cap.
Ross McEwan, RBS chief executive, and other RBS executives will also no longer receive annual bonuses, with all performance-linked pay now coming through share-based “long-term incentive” plans.
In its statement, RBS said its desire to pay 200 per cent of salary was “the best commercial solution” for the bank and was “understood during consultation with institutional shareholders”, suggesting the Government’s position had put it at odds with City investors.
But a significant minority of big institutions have become increasingly unhappy with the pay practises of banks amid a growing feeling that bankers’ interests are being put ahead of those of shareholders who put their money at risk so banks can carry out their activities.
A quarter of shareholders failed to back Barclays’ pay report at Thursday’s AGM and Standard Life Investments took the rare step of voicing its opposition publicly, to widespread public acclaim.
Standard Life is among those investors expected to file suit against RBS next week over its controversial £12bn rights issue in 2008. The investors who put up the cash were all but wiped out months later when the bank went cap in hand to the Government. The investors argue they weren’t properly informed about the bank’s financial state. RBS will defend the claim.
PIRC, the voting consultant which advices pension funds with investments, last night backed the bonus block on RBS, saying: “It is good that the UKFI has got to the position that concerned shareholders reached some time ago regarding the unacceptability of some banks’ remuneration policies and payments and the RBS bonus proposal.”
Deborah Hargreaves, director of the High Pay Centre, called the move “a welcome step on RBS’s road to rehabilitation”. She added: “The toxic pay culture in banking prevents banks from winning the public trust they need to thrive in the long-term. Now the Government must make sure RBS do not attempt to find ways around this cap.”
Andrew Tyrie, who chairs the Treasury Select Committee and the Parliamentary Commission on Banking Standards, said the move demonstrated that the Government, not UKFI, now held the whip hand over RBS.
- 1 Michelle Rodriguez: Fast & Furious actor apologises after telling 'minorities' to stop taking on 'white' roles
- 2 Raif Badawi, the Saudi Arabian blogger sentenced to 1,000 lashes, may now face the death penalty
- 3 PornHub turns masturbation into energy in bid to save the planet
- 4 Robert Mugabe eats a zoo for 'obscene' 91st birthday party
- 5 The remarkable archaeological underwater discovery that could open up a new chapter in the study of European and British prehistory
Michelle Rodriguez: Fast & Furious actor apologises after telling 'minorities' to stop taking on 'white' roles
Boris Nemtsov shot dead: Putin critic may have been murdered by Islamic extremists, says president-led committee
British are sexually uptight, dirty and drink too much – according to Spanish book
Raif Badawi, the Saudi Arabian blogger sentenced to 1,000 lashes, may now face the death penalty
PornHub turns masturbation into energy in bid to save the planet
New theory could prove how life began and disprove God
This is what it's like to be dead, according to a guy who died for a bit
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Ukip would cut billions from Scottish budget to fund English tax cuts
Russia's roadmap for annexing eastern Ukraine 'leaked from Vladimir Putin's office'
iJobs Money & Business
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...
£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...
£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...