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’

Associate Business Editor

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.

News
The Banksy image in Folkestone before it was vandalised
people
Life and Style
tech

Sales of the tablet are set to fall again, say analysts

Sport
football West Brom vs Man Utd match report: Blind grabs point, but away form a problem for Van Gaal
Arts and Entertainment
Gotham is coming to UK shores this autumn
tvGotham, episode 2, review
PROMOTED VIDEO
News
i100
Arts and Entertainment
Bloom Time: Mira Sorvino
tvMira Sorvino on leaving movie roles for 'The Intruders'
News
First woman: Valentina Tereshkova
peopleNASA guinea pig Kate Greene thinks it might fly
News
Brian Harvey turned up at Downing Street today demanding to speak to the Prime Minister
news

Met Police confirm there was a 'minor disturbance' and that no-one was arrested

Arts and Entertainment
George Lucas poses with a group of Star Wars-inspired Disney characters at Disney's Hollywood Studios in 2010
films

George Lucas criticises the major Hollywood film studios

Voices
Chris Grayling, Justice Secretary: 'There are pressures which we are facing but there is not a crisis'
voices

Does Chris Grayling realise what a vague concept he is dealing with?

News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
A street vendor in Mexico City sells Dorilocos, which are topped with carrot, jimaca, cucumber, peanuts, pork rinds, spices and hot sauce
food + drink

Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets

Life and Style
The charity Sands reports that 11 babies are stillborn everyday in the UK
lifeEleven babies are stillborn every day in the UK, yet no one speaks about this silent tragedy
News
Blackpool is expected to become one of the first places to introduce the Government’s controversial new Public Space Protection Orders (PSPOs)
news

Parties threaten resort's image as a family destination

Life and Style
Northern soul mecca the Wigan Casino
fashionGone are the punks, casuals, new romantics, ravers, skaters, crusties. Now all kids look the same
Life and Style
gaming

I Am Bread could actually be a challenging and nuanced title

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Customer Service Executive / Inbound Customer Service Agent

£18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...

ASP.NET Web Developer / .NET Developer

£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....

Operational Risk Manager - Asset Management

£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

Project Coordinator - 12 month contract

£27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...

Day In a Page

Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Salisbury ranked seventh in world’s best tourist cities

The city is home to one of the four surviving copies of the Magna Carta, along with the world’s oldest mechanical clock
Let's talk about loss

We need to talk about loss

Secrecy and silence surround stillbirth
Will there be an all-female mission to Mars?

Will there be an all-female mission to Mars?

Women may be better suited to space travel than men are
Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

'They poured water on, then electrified me...'

If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
James Wharton: The former Guard now fighting discrimination against gay soldiers

The former Guard now fighting discrimination against gay soldiers

Life after the Army has brought new battles for the LGBT activist James Wharton
Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

Panic over Ebola threatens to infect the midterms

Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
Premier League coaches join the RSC to swap the tricks of their trades

Darling, you were fabulous! But offside...

Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

How to dress with authority

Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

New book on Ian Curtis sheds fresh light on the life of the late singer

'Joy Division were making art... Ian was for real' says author Jon Savage
Sean Harris: A rare interview with British acting's secret weapon

Sean Harris: A rare interview with British acting's secret weapon

The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

Tim Minchin interview

For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
Boris Johnson's boozing won't win the puritan vote

Boris's boozing won't win the puritan vote

Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

Tim Wheeler: Alzheimer's, memories and my dad

Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album