RBS faces government cap on bonus payments

The Royal Bank of Scotland Group (RBS) is facing a cap on bonuses by the Treasury in a move which could lead to the bank’s directors resigning.

The government, mindful of the size of payouts some bankers could receive only months before a general election, may decide to cap bonuses, with the RBS bonus pool for 2009 thought to be in the region of £1.5bn.

The bank said: “Our business plan requires us to operate commercially in competitive markets and this plan underpins the prospects of recovering value for taxpayers and other shareholders alike.”

The bank’s directors are thought to have taken legal advice over any government plans to cap bonuses, concerned that it could affect the bank’s ability to retain key staff.

Chancellor Alistair Darling has asked UK Financial Investments, which manages the public stake in the bank, to carry out “stringent tests” on what level of bonuses is necessary to retain staff.

Click here for more articles on reward and bonuses