RBS, Ulster Bank blocked from giving huge bonuses
THE BRITISH government has blocked attempts by Ulster Bank and RBS bosses to receive bumper bonuses.
Royal Bank of Scotland had been attempting to pay bonuses of as much as twice employees' fixed pay. The generous payment plan would have extended to executives at Irish subsidiary Ulster Bank.
But the move has now been abandoned after the UK Treasury, which owns more than 80pc of RBS after pumping £46bn (€56bn) into the lender to shore it up in 2008, said it would veto the proposal.
"RBS is heading in the right direction, but it has not yet completed its restructuring and remains a majority publicly owned bank," the Treasury said. "An increase to the bonus cap cannot be justified."
Ulster Bank's top executives, have never been subject to the €500,000 salary cap imposed on staff at bailed out banks here.
The UK has placed far less stringent measures in place at its own bailed-out banks reflecting fears of an exodus of banking talent to unrestricted institutions.
While it has blocked large bonuses at RBS, the UK government is not in favour of pay caps more generally in the sector.
It recently launched a legal challenge in the courts against EU proposals for a similar rule to be put in place across Europe that would apply to non-bailed out banks.
Commentators warned yesterday that the decision in RBS case was purely a political one, since the bank will simply push up base salaries rather than bonuses, an even riskier move from shareholders' perspectives.
"This appears purely political," said Christopher Wheeler, a banking analyst at Mediobanca. "RBS will have to push up the fixed compensation element, which will hurt the business and hence shareholders."
Banks across Europe have come under fire from the public, shareholders and politicians for extravagantly rewarding staff at a time of austerity that was brought on in part by banks' reckless lending.
Anger is still very fresh in Ireland. At Bank of Ireland's AGM yesterday, one shareholder told chief executive Richie Boucher that his €843,000 pay packet was "disgraceful". Mr Boucher joined the lender before the cap was introduced and so is exempt from it.
AIB bosses, meanwhile, were given the cold shoulder by the Department of Finance earlier this year when they attempted to negotiate a future reintroduction of bonuses.