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Pseudo-toxic bonuses come to RBS

When we ran a post last week invoking reports that cash bonuses at RBS would be restricted to 25k, we were lambasted for printing a ‘wish’ from a ‘liberal rag.’

It now looks like 25k may have been wishful thinking. RBS has issued a release, saying that it won’t be paying cash bonuses at all this year, except to a few people with guarantees.

With a possible view to avoiding dilution of the taxpayer’s stake, everyone else of any importance in RBS’s markets unit will receive deferred bonuses comprised of the banks’ own subordinated debt, downgraded by Moody’s back in January and unquestionably toxic were it not for the presence of the still Aaa rated UK government.

According to the bank’s release –

‘ Staff who are essential to the bank’s recovery and who might otherwise be at serious risk of leaving, and who remain with the Bank will receive a deferred award for 2008. The deferred award will be released in three equal annual instalments beginning June 2010 and payable in sub-ordinated debt of RBS i.e. not in cash.

There are clawbacks too –

In individual cases up to 100% of these deferred awards will be subject to forfeiture at the discretion of the Remuneration Committee and if future losses arise in relation to their 2008 activities.

RBS is making a big deal about the fact that the amount of subordinated debt doled out will, ‘represent a very significant reduction on the comparable prior year totals.’ The Financial Times puts the total at around 600m, which works out around 28k per head if evenly divided between staff in the dwindling markets business.

Total cash bonuses at the bank are being cut by 90% to a bare minimum of 175m. Among the recipients of guarantees is thought to be Doug Tiesi, head of real estate structured finance at RBS, who is said to have joined on a multi-year guarantee in 2007.

Comments (13)

  1. Can I just be the first to add, ha, ha & ha? Clearing banks should stop pretending to be IBs…

  2. Yeah, let the IBs be IBs, like Lehman… oh wait

  3. IB(ankers) who led RBS -ABN AMRO deal should be in salvery forever! I hope, Frontie, you werent there.

  4. Hahaha! Serves them right for working at an inferior 2nd tier bank. This is hilarious, spent the whole day people I know there. Average pay 2k cash, hilarious!!

  5. It can’t get worse than this!! Most people in my team are hoping to get axed in order to get the redundancy payment. There’s a good chance that this will happen. I feel that if I stay in GBM now it will look bad in my CV.

    A – soon to be former – RBS banker Reply
  6. You guys really do talk a lot of rubbish. Anybody who actually knows anything about capital markets knows that RBS is one of the biggest players in the world in FX, bonds and rates. The equity markets are dwarfed in size by these markets, so hardly second tier. As for questioning whether it will look bad on your cv….you need to get a grip of yourself! Finally, Henry – you are a clown. If you were actually any good at what you do you wouldn’t be working in the Wharf or the City. When you want to make the step up and join the big boys, come across town for an interview for an analyst role and we will see how you get on making the tea.

  7. no bonuses at dresdner…remember where you read it first…..

  8. The thing is Brits (and other Europeans) just don’t get it. The invesmtent banking bonus culture is a very American thing. It’s part of an incentive mechanism to get the best out of employees and that is applied to a whole range of American industry, not just finance. How that fits into the European socialist model of industry is not quite clear. RBS was a follower of the pack, not a leader. It saw the vast profits of Goldman, Morgan, Merrill etc during the boom years and wanted that. So it decides to pay for the best “talent” during the boom years i.e. big bonuses. Copy the Americans. Except the Square Mile is quite different to Wall Street. When the inevitable bust came….we see all of this…revert back to the socialist model. Personally, I feel the worst thing that Ameican companies have done is impose an almost alien culture on a society that is quite different to their own. It’s interesting to note that UK invesment banking in the 1970s and early 80s, before the americans arrived, was better for British society at the time. ie, as an assistant to corporate Britain not its’ master.

  9. re: no bonuses at dresdner – dont forget many DK people have a transcript of promises made in September by CEO Jentzsch.

    This will ultimately lead to recovery of DK 08 bonuses according to employment lawyers as this is a simple breach of contract, whatever commerz says.

    Role on the courts…

    DK johnny fired up Reply
  10. RBS = process driven bonuses for process driven bankers.

  11. @NYTrader

    I liked your analysis. How do you explain the 500K executive cap then? If Obama is not a socialist, then what?

    (Embarrassed to say) RBS banker Reply
  12. (Embarrassed to say) RBS banker –

    First of all, I’m talking about a broader context of society and economy. America has always been a “fend for yourself” free enterprise type of country with a strong emphasis on individual success. Obama is not a “socialist” in the european sense. Obama deep down would not want PERMANENT executive pay caps. I am sure he has a timeline in which the banks become profitable again, TARP money is paid back and Wall Street can resume what is does best….making money. The executive pay caps are just a temporary measure until the TARP money is repaid. Everyone in the US Congress knows that. In the meantime, America’s army of tax accountants and lawyers will find ever ingenious ways to get around the pay caps for their clients.
    The British, (and Europeans) on the other hand are a different matter. What Gordon Brown is proposing on executive pay I think will be irreversible for British banks. I’ve seen in Europe once a company is forcibly nationalized by the government, it never goes private again. Like I said before, different cultures.

  13. Totally agree with NYTrader: something just cannot be copied or shopped, or at least RBS should’ve bought an American one not ABN.
    As also an (Embarrassed to say) RBS banker, and remote from its British HQ and keep making impressive deals still with colleagues, I predict when times come back, people will just jump out unconditionally. Because now it actually feels to us as if we’re working for the Brits who could only push up bubble assets and cry out loud later and steal money around the world (luckily, it has to steal, not just easily take away)

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