Author: By Holly Williams, Press Association
The two banks will not pay discretionary cash bonuses to any staff earning
above £39,000 for 2009.
The bonus ban also applies to high-earning investment bankers, who
traditionally pick up substantial windfalls each year as part of their
Lloyds and RBS have also agreed that senior executive board members will defer
all 2009 bonuses for three years – including long-term incentives due – “to
ensure that their remuneration is better aligned with the long-term
performance of their banks”, according to the Treasury.
The pay clampdown comes in line with wider reforms in remuneration across the
international banking industry.
A G20 agreement on pay is seeking to stamp out excessive pay practices that
have been widely blamed for playing a part in risk-taking that led to the
The international reforms are calling for claw-back clauses and three-year
deferrals on up to 60% of bonuses paid to avoid rewards for future failure.
But today’s news that discretionary bonuses will be canned takes the pay
changes a step further.
RBS has already put aside £1.79 billion in the first half of this year to
cover staff expenses, including salaries and bonuses.
The recent rebound in stock markets has led to bumper investment banking hauls
so far this year and the sector is estimated to be preparing to fork out a
50 per cent hike in annual windfalls to £6 billion.
RBS, which has a substantial investment banking operation, said today the
bonus cap presented the bank with another hurdle, with remuneration key in
the banking sector to attracting and retaining top staff.
Stephen Hester, chief executive of RBS, said the ban on bonuses was “one of
the additional obstacles that makes our job of recovering money for the
taxpayer more difficult… although I completely understand the rationale
Bank pay also came under scrutiny today in a Treasury Select Committee hearing
with Sir David Walker, who is compiling a Government-commissioned review on
remuneration and practices in the City.
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