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RBS’s million-a-year bonus club comes under fresh scrutiny

Other senior bankers also due to be handed share packages under three-year-old long-term incentive plans

Royal Bank of Scotland is braced for fresh scrutiny of an estimated £500m of payouts to its investment bankers, following the decision by Stephen Hester to waive his bonus of almost £1m.

While the focus is on the chief executive, other senior bankers at RBS are expecting to receive bonuses for their efforts in 2011. They are also due to be handed shares they were awarded three years ago under long-term incentive plans amounting to millions of pounds. Among them are John Hourican, who runs the investment bank and could get £4m, and Ellen Alemany, based in the US.

Liberal Democrat peer Lord Oakeshott called for “a really tough line” to be taken after the bank revealed a year ago that 323 of its key staff (although not all in the investment bank) had taken home £1.1m on average in 2010. “The RBS million-a-year club looks about as hard to join as the National Trust,” said Oakeshott. It has already been announced that any bonuses paid at RBS and Lloyds Banking Group, also bailed out, will be capped at £2,000 in cash – a measure intended to allow employees of the high street operations to get their bonuses – with the remainder in shares or bonds issued by the bank.

Some 3,500 City-style jobs are being cut by Hester who is credited with shrinking the investment bank and takes the total number of roles lost since he took the helm to around 33,000.

Fresh questions will now be asked about the intentions of his counterparts at rival banks.

António Horta-Osório, the chief executive of Lloyds Banking Group announced earlier this month that he will not take an annual bonus for 2011 that could have been worth £2.4m. Horta-Osório said that he took the decision because of the “tough financial circumstances of people” as well as the bank’s poor performance and his two month’s absence following a severe bout of insomnia. After returning to work on 9 January, Horta-Osório had discussed the potential bonus with his family before telling the board of the bank, which is 41% owned by the taxpayer, he did not want to be considered for a payout.

Bob Diamond, chief executive of Barclays, could receive as much as £3.4m as his bonus for 2011 – and a total pay deal of £10m or so – although a group of the company’s largest shareholders have warned they will not accept lavish payouts to Diamond and other senior figures.

He and two other investment bankers at Barclays last year shared more than £100m, including £30m in pay and bonuses for 2010 and another £77m for past performance.

Barclays is scheduled to publish its 2011 profits on 10 February and HSBC a fortnight later, when it is traditionally the first of the banks to publish full details of how its staff have been paid. Neither Barclays nor HSBC was bailed out by the taxpayer.

The chief executive of HSBC, Stuart Gulliver, who took over last year after running the investment bank, could be in line for up to £4.8m if he was awarded his maximum bonus for 2011. Gulliver, who has a base salary of around £1m, intends to cut 25,000 jobs by 2013 as part of radical rethink of an original strategy of international expansion.

Lloyds Banking Group is in the process of trying to claw back some of the £1.45m bonus paid to its former chief executive, Eric Daniels, in 2010.

It was awarded to Daniels just weeks before his successor, António Horta-Osório, decided the bank should put aside a provision of £3.2bn for payment protection insurance mis-selling, which drove Lloyds into a loss. When Daniels was awarded the bonus – which was 63.3% of his maximum potential payout – in February 2011 it was deferred for three years. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds