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| Chancellor sets RBS bonus limits | Chancellor sets RBS bonus limits |
| (9 minutes later) | |
| Chancellor Alistair Darling has announced that the government is limiting bonuses paid out to staff by the Royal Bank of Scotland (RBS). | Chancellor Alistair Darling has announced that the government is limiting bonuses paid out to staff by the Royal Bank of Scotland (RBS). |
| "We want to see a cultural change where short-term bonuses are replaced with incentives for the long term," he said. | "We want to see a cultural change where short-term bonuses are replaced with incentives for the long term," he said. |
| Mr Darling said bonuses at RBS would be cut from the £2.5bn paid last year to £340m. There would be "no reward for people who have failed," he added. | Mr Darling said bonuses at RBS would be cut from the £2.5bn paid last year to £340m. There would be "no reward for people who have failed," he added. |
| And bonuses will no longer be paid in cash, but in shares. | And bonuses will no longer be paid in cash, but in shares. |
| Profit share | Profit share |
| The bank would pay "the minimum it can with regard to its legal obligations," the chancellor said, referring to the fact that some employees are contractually obliged to receive bonuses. | The bank would pay "the minimum it can with regard to its legal obligations," the chancellor said, referring to the fact that some employees are contractually obliged to receive bonuses. |
| Addressing concerns that directors are those that have benefitted most from the bonus culture in the past, the chancellor said front line staff would be getting some reward. | Addressing concerns that directors are those that have benefitted most from the bonus culture in the past, the chancellor said front line staff would be getting some reward. |
| Staff are among the victims, not the culprits of the financial crisis Derek Simpson, Unite union | |
| "Of course they've looked after the low paid," he explained. | "Of course they've looked after the low paid," he explained. |
| Of the £340m in bonuses paid out, £175m will meet contractual obligations for some investment bankers. | Of the £340m in bonuses paid out, £175m will meet contractual obligations for some investment bankers. |
| Another £165m will be paid out of a profit share scheme to 80,000 front line staff. | Another £165m will be paid out of a profit share scheme to 80,000 front line staff. |
| But the chancellor added that "if they [employees] do not come up to the mark, that money can be clawed back". | But the chancellor added that "if they [employees] do not come up to the mark, that money can be clawed back". |
| Mr Darling said that bonuses at Lloyds Banking Group would be subject to the same principles of not rewarding failure and focusing on the long-term strength of the bank. | Mr Darling said that bonuses at Lloyds Banking Group would be subject to the same principles of not rewarding failure and focusing on the long-term strength of the bank. |
| Union reaction | |
| Derek Simpson, joint leader of Unite trade union, said many of his members were "not in the City of London earning mega bonuses" and that their "small annual bonus" supplemented low incomes of as little as £12,000 a year. | |
| The union said it welcomed "the acknowledgement from the government that staff at RBS, and across the financial services sector, are not the culprits of the financial crisis and must not face cuts in their pay packets in a desperate attempt to satisfy the hunger of the pack". | |
| "To punish workers for the actions of senior bankers represents a demand for a pound of flesh from the wrong people. | |
| "Staff are among the victims, not the culprits of the financial crisis." | |
| Bonuses 'destructive' | Bonuses 'destructive' |
| Short-term cash bonuses have been heavily criticised for encouraging bankers to focus on short term profits. | Short-term cash bonuses have been heavily criticised for encouraging bankers to focus on short term profits. |
| "These short-term cash bonuses have been so terribly destructive," said Ruth Lea at Arbuthnot Banking Group. | "These short-term cash bonuses have been so terribly destructive," said Ruth Lea at Arbuthnot Banking Group. |
| "If the taxpayer hadn't bailed out this bank in the early part of October, this bank would have been bust and these people would have been out of a job," she added. | "If the taxpayer hadn't bailed out this bank in the early part of October, this bank would have been bust and these people would have been out of a job," she added. |
| Last weekend, Mr Darling defended the government's handling of the banking crisis in light of expected record losses at HBOS. | Last weekend, Mr Darling defended the government's handling of the banking crisis in light of expected record losses at HBOS. |
| Lloyds Banking Group - which completed its takeover of HBOS last month - said its subsidiary would report losses of nearly £11bn for 2008. | Lloyds Banking Group - which completed its takeover of HBOS last month - said its subsidiary would report losses of nearly £11bn for 2008. |