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December 3, 2009 9:11 pm
Royal Bank of Scotland has signalled that it will succumb to pressure to pay its high-flying investment bankers substantially less than rival institutions amid an escalating row with the government.
The bank, which is 70 per cent owned by taxpayers, is hoping to avoid a high-stakes showdown after it was forced to give the Treasury the final say over the total size of its bonus pool as a condition of signing up to a scheme that will insure £240bn in toxic assets.
RBS insiders insisted on Thursday that pay-outs in its investment banking division would be “at the low, low end of the scale”, even if that meant losing experienced staff to competitors.
The bank is confident of forging an agreement with the government after it emerged that RBS directors had sought legal advice about whether they would have to resign if the Treasury vetoed pay deals agreed by the board.
Gordon Brown sought to play down suggestions that RBS was being singled out. “Nobody is being discriminated against be-cause every bank is having to follow these procedures,” he said.
But Harriet Harman, leader of the Commons and Labour deputy leader, stepped up criticism. She said she “condemned” directors who had behaved with “recklessness and irresponsibility” and then – after a state rescue – wanted to give out “massive bonuses”.
“They already earn vast salaries, and now they are threatening to resign if they cannot indulge in largesse and the distribution of massive bonuses to top executives across the piste,” she said.
Lord Myners, City minister, also rounded on shareholder groups, challenging them to declare who they sided with: “What I want to see happen now is the major institutional shareholders – people like Legal and General, Standard Life, Fidelity – coming out with their statements on what their attitude is towards bonuses.”
Barclays Capital, the investment banking arm of Barclays, risked stoking public anger by increasing basic salaries for its 21,000 employees in a move that will see some bankers receive as much as a 100 per cent rise. Current base salaries are capped at £150,000 for employees, with bankers receiving the rest of their remuneration as bonuses.
The increases follow similar adjustments by several of BarCap’s competitors. BarCap is backdating the pay increases to June, which means its workers will receive a hefty cash payment at the end of this year.
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