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Pressure on Lloyds to copy RBS and cut back bonuses
Joe Murphy, Political Editor18 Feb 2009
LLOYDS Banking Group was today under pressure to curb bonuses in the wake of the Royal Bank of Scotland's agreement to reduce payouts.
Sources said "private conversations" were being opened between the Government and the bailed-out bank to ensure payments meet the mood of public anger over City excesses.
Downing Street was making it clear that Lloyds was not being seen in the same category as RBS, whose plans to pay a billion pounds in bonuses was vetoed by the Prime Minister.
That was because the taxpayer does not have a majority share, and because Lloyds was performing well before it shouldered the losses of stricken HBOS.
Mr Brown said all bailed-out banks including Lloyds and HBOS would have to accept curbs. Writing in The Times, the Prime Minister insisted "the same principles" must apply.
"We will seek to agree a fair package for staff at Lloyds-TSB/HBOS... based on the same principles and taking into account its own performance," he said.
RBS, now 68 per cent state-owned after accepting £20 billion in taxpayer support, conceded yesterday that cash bonuses would be slashed to £175 million this year from £2.5 billion last year. Other bonuses totalling several hundred million pounds will be paid out - but deferred over a three-year period and subject to claw-back conditions. They will also be in bonds rather than cash.
Lloyds Banking Group is reportedly considering bonus payouts of up to £120 million, and stunned the City last week after warning of £10 billion in annual losses at struggling HBOS.
Mr Brown said of the RBS payouts: "All legal commitments have been subject to thorough and independent scrutiny and only those where the bank has no option will be honoured."
However, a further £165 million is to be paid to workers below managerial grade in lieu of annual profit share payments, which have been abolished.
Mr Brown also offered soothing words to workers in the banking sector who have borne the brunt of public anger over the extravagant bonus culture.
He wrote: "None of these actions is designed to punish or scapegoat City workers. I am clear too that bonuses play an important role in attracting the best talent and in motivating staff, including those on modest incomes who work so hard, do so much to help a bank's customers and contribute to the overall profitability over many years.
"But we must also be clear that the old excesses, the one-way bets, have to be consigned to the past."
The Prime Minister will hold talks today with Robert Zoellick, president of the World Bank, and Dominique Strauss-Kahn, managing director of the International Monetary Fund.
They will be discussing the agenda for the G20 summit in London in April and the need for more co-ordinated regulation of the world financial system.
The premier will continue laying the ground for the G20 in talks with Italian prime minister Silvio Berlusconi in Rome tomorrow and other EU leaders on Sunday.
RBS's announcement followed mounting political pressure, with MPs from all parties voicing anger at the prospect that bonuses could still be paid despite the bank's rescue by the Government.
Shadow chancellor George Osborne said all bonuses of more than £2,000 should have been stopped and that, if necessary, the Government should have been prepared to go to court to defend the decision.
Reader views (2)
if the quality and talent of the current crop of
bankers who demand bonus's is evidenced by their
performance to date, we might all be better off if they
did walk.
it's not bonus they deserve in my opinion. council
housing,public transport and a good few years on the
average wage would sort the men from the old boys.
welcome in fresh faces with a healthy attitude,
ambitions to do an honest and truthful days work for a
just and correct wage.
- M.O'Brien, london.uk, 18/02/2009 19:33
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"Shadow chancellor George Osborne said all bonuses of more than £2,000 should have been stopped and that, if necessary, the Government should have been prepared to go to court to defend the decision."
Yet another embarassing example of Osborne's complete lack of understanding of the market. Units making money must reward their performers or they will walk to an operation that does. Does he want all the bailed out banks to be second tier, left with the dregs of staff the others don't want or does he want them to attract the best talent, perform well, recover and repay the public?
Until he gets a grip on this he is a liability to the Conservative Party.
- Js, The City, 18/02/2009 15:51
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