Part nationalised bank RBS has confirmed the action it has agreed with Chancellor Alistair Darling regarding City bonuses.
The measures follow public outrage over reports that the failed bank intended to pay out around £1billion in bonuses, despite having to receive a Government bailout of around £20billion.
The bonus cuts have, according to RBS
, seen the bank cut its cash bonus payouts to staff by around 90 per cent, down from £2.5billion to just £175million.
Speaking yesterday, Alistair Darling called the RBS bonus restrictions a "cultural change that I think will be replicated in other banks."
Commenting on the reforms, which focus on the premise of 'no reward for failure', RBS group chairman Sir Philip Hampton said: "We fully recognise, as a company, that we have to change materially not just the business we do but also the way we do business."
However, despite the announcements, reports are rife today that the £175million cash bonuses are just part of the remuneration which RBS will continue to pay its staff as a result of contractual obligations.
If reports are to be believed, RBS could still payout as much as £775million, as 'deferred awards' in the form of bonds paid to staff are expected to total around £600million.
Nevertheless, RBS has been forced to take action over bonuses and reform will take place. The same is yet to be said of the newly formed Lloyds Banking Group, which the Government also holds stakes in following the merger between Lloyds TSB
Prime Minister Gordon Brown wrote in The Times yesterday: "We will now seek to agree a fair package for staff at Lloyds TSB/ HBOS, the other bank in which the Government has a share, based on the same principles and taking into account its own performance."
He added: "I am certain that the values we celebrate in society - hard work, entrepreneurialism and responsibility not irresponsible short-termism - are the values that must underpin the future not only of our financial sector but of our economy as a whole. Banks must again become trusted stewards, not speculators, with people's money.
"With today's agreement on bonuses, we are taking further steps towards building a successful, competitive and responsible financial sector of the future."
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