RBS warned over large bonuses

Business Secretary Lord Mandelson has warned the RBS (RBS) about its intention of offering “exorbitant” bonuses to staff.

According to a report in The Times today, RBS plans to pay staff tens of millions of pounds in bonuses.

In 2007, the investment banking arm of RBS, a division known as global banking and markets (GBM), paid out £1.8 billion to employees - the majority of which is believed to have been bonuses.

While the current planned bonuses will not reach this amount, the bank is still expected to proceed with the payments.

Lord Mandelson said “Please be mindful about how this looks and what public opinion will be“.

RBS, which is now nearly 70% owned by the Government, is due to announce its full-year results later this month. It is expected to report a £28 billion loss - setting a record in UK corporate history.

John McFall, the chairman of the Commons Treasury Select Committee, said the bank needs a ‘reality check’.

It is understood that Stephen Hester, newly-appointed chief executive of RBS, is considering paying most of the bonuses in RBS shares, while a cap on payments is also being considered.

Last month, Northern Rock sparked outrage after it paid almost all of its 4,500 employees a 10% bonus - an average of £2,000 each.

In related news today, according to the Insurance Insider, RBS has abandoned talks with private equity bidders about the sale of its insurance arm, which includes the Churchill, Direct Line and Privilege brands.

Discuss this in the Finance Markets forums

Story link: RBS warned over large bonuses