State-rescued RBS and Lloyds agree to curb bonuses

9th February 2011, Comments 0 comments

Britain's state-rescued Royal Bank of Scotland and Lloyds Banking Group announced Wednesday that they will limit their chief executives' bonuses as part of a wide-ranging deal agreed with the government.

However, RBS boss Stephen Hester and his LBG counterpart, Eric Daniels, will still share 2010 bonuses that total almost £3.5 million (4.1 million euros, $5.6 million), the two banking groups said.

Hester will receive a total payout of £2.04 million while Daniels will receive £1.45 million. Both pay awards will be deferred into shares and payable after three years.

The UK government owns 83 percent of RBS and 41 percent of Lloyds after the two lenders were bailed out at the height of the global financial crisis.

"It is the board's intention that the RBS Chief Executive Officer's salary will remain unchanged for 2011 at the level set in 2008," RBS said in a statement.

"He will receive no cash bonus with the pre-existing arrangements replaced by a new share bank scheme.

"The share bank award for 2010 is intended to be £2.04 million, fully payable in shares, all deferred with the full value received after three years."

Lloyds said it had decided to take into account the current climate and the "desire for restraint" over the controversial issue of bonuses in the troubled sector.

"While the board is yet to approve the 2010 annual financial results for the group, it plans to award Mr. Daniels a bonus of £1.45 million, equivalent to 62.3 percent of his potential opportunity," LBG said in a separate statement.

"In considering the award, the board took into account the current environment and desire for restraint.

"It is proposed that this award will be deferred into shares until at least March 2013, which exceeds Financial Services Authority requirements."

RBS added that the 2010 bonus pool for the group's investment banking division would be cut to £950 million, compared with £1.3 billion in 2009.

The bonus pay details are part of a wider deal that was announced earlier by British finance minister George Osborne.

Osborne said that as part of so-called Project Merlin, the government and major banks had reached agreement over bankers' pay and bonuses, and the amount of loans that they will grant to businesses.

Total bonuses paid to British-based staff of Britain's four biggest banks will be lower than last year as part of the deal, which comes amid public anger over state funds used to bail out lenders during the financial crisis.

© 2011 AFP

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