RBS seeks to pay cash bonuses
LONDON: Royal Bank of Scotland (RBS) Group PLC is in talks with U.K. Financial Investments Ltd. to allow the U.K. bank to award cash bonuses to employees for 2010, but cap it at £50,000, a person familiar with the situation said Monday. The UKFI is the government arm that manages an 83% stake in RBS and 41% stake in peer Lloyds Banking Group PLC. It has to approve the bonus pool for RBS, which required the largest state bailout in the world following its near collapse during the financial crisis in 2008. RBS didn't distribute any cash bonuses last year.
Talks between the government and the bank are preliminary, since there are still days before the financial calendar year ends. RBS's board also hasn't held formal talks about 2010 bonus. By giving some a cash payout, the bank hopes to be able to convince employees to stay and not be poached by competitors. The push comes as the U.K. government and bank executives meet later this week to discuss compensation and lending policies. The U.K. government business secretary Vince Cable said over the weekend that he hopes the banks will show "real restraint" during the upcoming bonus season. He reiterated that if they don't act responsibly, the government could impose some additional form of taxation on them. The government has already introduced a £2.5 billion a year bank levy but has repeatedly warned it could take further action if necessary. On Friday, the U.K. regulator issued tougher guidelines on compensation for the financial services industry, including limiting the amount of cash bonuses to a maximum 50% of any payout awarded. Half of that must also be deferred. Lawyers and accountants say the rules could result in some employees paying more in tax than they receive in cash, since tax in most instances will be levied on the current value of the full payout, even though much of the cash and shares won't vest for years. -PB News