Bank 'cuts bonuses' after huge fine
The bonus pot at state-backed Royal Bank of Scotland will shrink this year as the bank pays an estimated £350 million fine for its role in the interbank lending rate scandal, according to reports.
Traders at the bank's investment arm have been told by senior staff the bonus pool will be smaller as cash is diverted to settle claims that it was involved in the Libor rigging controversy, according to the Sunday Times.
RBS is thought to be weeks away from reaching a deal with regulators in Britain, America, Japan and Singapore over claims that it was involved in manipulating the rate which governs the price of more than 500 trillion US dollars-worth of loans and transactions around the world, including household mortgages.
The Financial Services Authority (FSA) and two US regulators have already fined Barclays a combined £290 million in June and the scandal also claimed Barclays chief executive Bob Diamond, who was forced to resign. This month Swiss bank UBS agreed to pay almost £1 billion to regulators.
In the wake of the Libor scandal, politicians are pressing ahead with far-reaching reforms which will make it a criminal offence to manipulate rates such as Libor.
Traders at RBS have also been told the bank may confiscate bonuses from previous years that are due to be paid in the new year, according to the reports. RBS declined to comment.
Banks have come under pressure over their bonus culture since the start of the banking crisis in 2008.
New Barclays chief executive Antony Jenkins is understood to be planning a complete rethink of the way the bank rewards staff. Barclays is said to want to reduce pay levels and align bonuses on the "social impact" of deals signed and products sold.
It comes at the end of a difficult year for 80% state-owned bank RBS. An IT glitch in June that locked out many RBS, Natwest and Ulster Bank customers cost the bank £175 million, it said last month.
And its bill for mis-sold payment protection insurance claims reached £1.7 billion last month.