LONDON, Feb 18 – Britain\’s partly-nationalised Royal Bank of Scotland is to slash staff bonuses by over 90 percent this year, it said Tuesday amid growing public anger about banking-sector pay.
The news came shortly after finance minister Alistair Darling told Sky News that the bank, majority owned by the government, would cut bonuses to the "absolute legal minimum."
RBS — due to declare a record annual loss next week — also announced in a statement that no discretionary cash bonuses would be made for 2008, apart from legally-binding guaranteed payments.
Recent reports that the bank was mulling bonuses totalling one billion pounds had sparked public outrage because many Britons are struggling to cope with a fierce recession rooted in the troubled banking sector.
But the bank said Tuesday that there would be "no reward for failure."
"Total cash bonus payments for 2009 will amount to 175 million pounds (198 million euros, 250 million dollars). Therefore total cash spend overall will have been reduced by more than 90 percent," the bank said.
Senior and US staff will meanwhile face a pay freeze this year, as well as workers in the group\’s investment banking arm.
RBS admitted last month that it will suffer a 2008 annual loss of up to 28 billion pounds — a record in British corporate history — due to the global financial crisis and the costly and mistimed consortium takeover of Dutch lender ABN Amro in 2007.
Chairman Philip Hampton added: "We have tried, wherever possible, to focus the worst impact of the changes on our more senior staff and, in particular, those in the concentrated areas of our business responsible for the major losses recorded in 2008."
The bank also said that it would give "deferred awards" for 2008 to workers who were deemed "essential to the bank\’s recovery and who might otherwise be at serious risk of leaving."
Darling, whose government owns 68 percent of RBS after a major recapitalisation earlier this year, added: "They have cut down the payments that they are making to the absolute legal minimum."
The new bonus system marked a "cultural change" for the bank, according to Darling.
"We have had the opportunity now to open the books, to go through what RBS has been doing.
"A huge amount of change has to take place in this bank and what you are now seeing is a cultural change in the way in which payments are made."
Royal Bank of Scotland, which announces annual results on February 26, was bailed out earlier this year after running into trouble when it tried unsuccessfully to raise funds from shareholders because of the credit crunch.
British Prime Minister Gordon Brown had last week called time on the current culture of big bonuses for City of London bankers.
"The old short-term bonus culture is gone," he told a conference in London.
"No rewards for failure, rewards only for long-term and sustainable success, the old bonus culture removed and a new culture that rewards sustainable success brought in."
Also last week, former RBS bosses apologised for their leading role in the takeover of ABN Amro for a record-breaking 71 billion euros (100 billion dollars) in 2007 — before the credit crunch ravaged the sector.
The British government also holds 43 percent of the Lloyds Banking Group, made up of merged lenders HBOS and Lloyds TSB, and Northern Rock which was nationalised last year.