Brown in new warning on bank bonuses
Gordon Brown said today that bailed-out banks Lloyds and HBOS would be subject to the same bonus crackdown that saw Royal Bank of Scotland slash payouts by 90%.
Writing in The Times, the Prime Minister revealed “the same principles” that were applied to RBS bankers would apply to staff at the recently merged Lloyds Banking Group.
RBS, Ulster Bank’s parent company, which is now majority state-owned after accepting £20 billion in taxpayer support, announced yesterday that cash bonuses would be slashed by 90% to £175 million this year.
Pledging that the banking industry’s “old excesses” and “one-way bets” would be consigned to the past, Mr Brown said: “We will now seek to agree a fair package for staff at Lloyds-TSB/HBOS...based on the same principles and taking into account its own performance.”
Lloyds Banking Group is reportedly considering bonus payouts of up to £120m, and stunned the City last week after warning of £10bn in annual losses at struggling HBOS.
Mr Brown – who was facing questions on bank bonuses at his monthly press conference today – said of the RBS payouts: “All legal commitments have been been subject to thorough and independent scrutiny and only those where the bank has no option will be honoured.”
Chancellor Alistair Darling yesterday said the agreed bonuses were the “absolute legal minimum” the bank was contractually obliged to pay staff.
The announcement follows mounting political pressure, with MPs from all parties voicing their anger at the prospect that bonuses could still be paid, even though the bank was rescued by the Government.
RBS said that deferred awards for performance in 2008 would be paid only to staff considered “essential to the bank’s recovery and who might otherwise be at serious risk of leaving”. A “clawback” option has been introduced for the non-cash awards made to staff for 2008 if losses arise from their activities.
The bank is now conducting a review of its pay and incentive policies, with details due in its forthcoming annual report.
An Ulster Bank spokeswoman said: “As part of the RBS Group, Ulster Bank Group can confirm that following the announcement by RBS in relation to pay and reward for 2008/09 the same principles will be applied in the Republic of Ireland and Northern Ireland by Ulster Bank including as previously announced RBS Board executive directors will receive no bonus for 2008 performance and no pay increase in 2009.”
Mr Brown also offered some soothing words to workers in the banking sector who have borne the brunt of a public backlash over the extravagant bonus culture.
He wrote: “None of these actions is designed to punish or scapegoat City workers.
“I am clear too that bonuses play an important role in attracting the best talent and in motivating staff, including those on modest incomes who work so hard, do so much to help a bank’s customers and contribute to the overall profitability over many years.
“But we must also be clear that the old excesses, the one-way bets, have to be consigned to the past.”
The Prime Minister was also holding talks today with Robert Zoellick, president of the World Bank, and Dominique Strauss-Kahn, managing director of the International Monetary Fund.
They will be discussing the agenda for the G20 summit in London in April.