£1bn bonuses plan for bank bosses

Royal Bank of Scotland (RBS) is already in talks over the massive package with the body set up to manage the taxpayers' stake in bailed-out banks.

The claims over the scale of the payouts, in the Sunday Telegraph, comes just days after Gordon Brown warned RBS there should be "no rewards for failure" amid mounting anger over banks' behaviour.

RBS chiefs were said to be aiming to stem outrage by limiting the cash element being paid to each employee to £25,000 with the rest made up in shares in the bank.

Most of the share options would be deferred or withheld if the employee left within a set period or if their part of the bank made "significant" losses in the next two years, the paper said.

Around half of the total would be "discretionary" payments with the rest money RBS is "contractually" obliged to give to employees of ABN Amro, the Dutch bank bought by RBS. The total payout would be around 60% lower than last year's.

RBS, now 68%-owned by the Government, is due to report its 2008 results in three weeks, when it will confirm a loss of several billion pounds.

A spokeswoman said that the board was "yet to make a decision on remuneration policy for the year".

UK Financial Investments (UKFI), the firm set up by Chancellor Alistair Darling to oversee state investments in the banks, must approve any bonus package.

However Downing Street has said any proposal "would only be supported by UKFI if it is consistent with the taxpayers' interest".