LONDON (Reuters) - Part-nationalised Royal Bank of Scotland is cutting cash bonuses by over 90 percent and plans to overhaul its future payout structure as part of a government move to quell public anger over payouts for bankers.
Chancellor Alistair Darling said RBS would only pay bonuses it was contractually obliged to, which will amount to a cash payout of 175 million pounds for last year.
The previous year’s bonus pool is estimated to have been near 2.5 billion pounds and RBS had been considering paying out 1 billion pounds in bonuses, according to media reports, which prompted a public and political backlash.
“They’ve cut down the payments they are making to the absolute legal minimum,” Darling said.
RBS, which is 70 percent owned by the government after being rescued with 20 billion pounds of taxpayer cash, said in a statement no bonuses or pay increases would be made to staff associated with the losses suffered last year.
Darling said future bonuses will be restricted and can be recouped if people’s performance falls short of the mark.
Bankers who are essential to RBS’s recovery and who might leave will receive a deferred non-cash award for 2008, RBS said.
This will be paid in three equal annual instalments beginning in June 2010.
It plans to follow a similar structure for 2009 and said it is undertaking a review of its future remuneration.
“A fundamental reform to pay and reward is needed to reflect the reality of the situation the company is in,” said Philip Hampton, RBS chairman. “The board is satisfied that this approach will be seen by most reasonable observers to have balanced difficult conflicting issues.”
Bankers in Britain and elsewhere are facing public anger over their role in the credit crisis and the multi-million pound bonuses they rewarded themselves with in the run-up to it.
The government has come under heavy pressure to curb the bonus culture, especially as taxpayers now own a large chunk of the banking sector. Politicians in the United States, Germany and elsewhere have also pledged to clamp down on payouts and reform the bonus culture.
The pressure has been greatest on banks that have taken taxpayer cash, including RBS and Lloyds Banking Group.
UK Financial Investments, the body set up to handle the government’s stake in RBS and Lloyds, declined to comment on how talks were going with Lloyds.
Lloyds declined to comment on reports it will pay out 120 million pounds in bonuses, but said where its staff have met performance targets “it is right that colleagues receive some form of financial recognition.” Most staff received bonuses of less than 1,000 pounds last year, it said.
Editing by Sharon Lindores