Lloyds to review bonuses before participating in Government’s Asset Protection Scheme

| March 2, 2009 | 0 Comments

Lloyds Banking Group’s involvement in the Government’s Asset Protection Scheme is delayed after UK Financial Investments (UKFI) told it to review its plans to pay staff approximately £120 million in bonuses.

UKFI was established late last year with the responsibility of maximising value for taxpayers and was set up after the Government rescued Royal Bank of Scotland (RBS), Lloyds TSB/HBOS (the latter now known as Lloyds Banking Group).

According to a report in the Sunday Telegraph, it is believed that the UKFI rejected Lloyd’s proposals because the bonus payments were not sufficiently dependent on future performance and that the overall amount was excessive.

Lloyds has been defending its bonus scheme for the last few weeks and has said that “many of our branch colleagues earn just £17,000 a year and will get a bonus of less than £1,000“, adding that “when stretching performance targets are met, some appropriate financial recognition is right.”

The two groups are still believed to be locked in talks regarding the matter. Bank bonuses have been the subject of heavy criticism of late since it is banks that are being blamed for the recession.

RBS has already signed up to the Government’s Asset Protection Scheme which will see the Treasury insure £325 billion worth of toxic assets and risky loans. It is anticipated that by participating in the scheme, RBS will reduce risk for shareholders whilst providing greater support for UK customers via increased lending.

Lloyds is expected to insure £250 billion of assets for a fee that, reflecting the risk involved, will be considerably higher than the £6.5 billion paid by RBS.

Last week, Lloyds Banking Group revealed a £10.8 billion loss for 2008 at HBOS, while Lloyds’ own profits plummeted by 80% to £807 million, which the bank described as a “resilient underlying business performance”.

UKFI is headed by John Kingman, the Treasury official who managed the nationalisations of Northern Rock and Bradford & Bingley and the rescue package of the banking system.

Tags: , , ,

Comments (0)

Trackback URL | Comments RSS Feed

There are no comments yet. Why not be the first to speak your mind.

Leave a Reply

Visited 4550 times, 1 so far today