Pseudo-toxic bonuses come to RBS

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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.

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