Government vetoes RBS bonus plans

Friday 25 April 2014

Royal Bank of Scotland's hopes of paying bonuses twice the size of salaries have been scuppered by the Government.

Under new European rules, the part-nationalised bank requires the approval of shareholders to award variable remuneration up to 200% of fixed pay.

However, RBS has been told by UKFI, which manages the Treasury stake, that it will not support a resolution which proposes a 2:1 ratio. It means the proposal will no longer be put to shareholders at its AGM in June.

With other banks currently seeking approval for the 2:1 ratio, the bank warned it now faces a "commercial and prudential risk" as it tries to operate within a 1:1 fixed to variable pay ratio.

It said: "The  oard believes the best commercial solution for RBS is to have the flexibility on variable to fixed pay ratios that is now emerging as the sector norm. This would also allow RBS to maintain the maximum amount of compensation that could be subject to performance conditions including clawback for conduct issues that may emerge in future. This position was understood during consultation with institutional shareholders."

A Treasury spokesman said there could be no rise in the bonus cap because the bank has not yet completed its restructuring and remains majority public-owned.