RBS bonus pool drops under £500m after ban
...but bank will still face fury over share handouts to top executives
THE Royal Bank of Scotland is to slash its bonus pool for bankers this year in response to an EU clampdown and a swathe of swingeing fines from regulators.
The total i n the pool could drop below £500 million, but the bank is still likely to face attacks from critics as many executives will be handed huge share-based allowances engineered to sidestep the European cap on bonuses.
RBS, which is 79 per cent owned by taxpayers, awarded £576million in bonuses last year, but new EU rules mean that banks can no longer pay out any bonus worth more than 100 per cent of an employee’s salary.
The EU will allow banks to pay higher bonuses of up to 200 per cent of salary, but only with shareholder approval.
Chancellor George Osborne blocked RBS from paying bigger bonuses for 2014 before last year’s annual general meeting.
RBS’s bonus pool has declined significantly since 2010 when it paid out almost £1.4billion. It was fined £400million for rigging the £3trillion-a-day foreign exchange market last year and the bank is expected to deduct at least part of that bill from the bonus pool.
Its investment bank division has been one of the weakest performers in that sector over the last year and payouts to investment bankers will be down accordingly.
But there will still be big bonuses for bankers hired to manage RBS’s risky assets. Profits from that division have been key to the group’s improved performance as a result of a recovery in the prices of Irish property loans and other riskier assets it holds.
RBS’s executive team, comprising around a dozen top executives and including chief executive Ross McEwan, have pledged not to take bonuses for 2014, although they will receive extra ‘allowances’ as part of the system which was devised to dodge the bonus cap.
The bank posted stronger overall profits in 2014, largely thanks to the economic recovery in Ireland and elsewhere. For the nine months to the end of September its profits were £3.9billion, compared with £740 million for the same period in the previous year.