RBS risking a backlash over bonuses for it's top bankers

Royal Bank of Scotland will be handing its top bankers a bigger slice of investment banking revenues this year, further fuelling the ire against City bonuses.

While the 2010 bonus pot is set to be reduced overall because of a lacklustre year, traders and dealmakers will scoop a larger percentage of the turnover generated at the division, industry sources said.

RBS will have to increase this 'compensation ratio' after handing many of its investment bankers hefty pays rises this year in a bid to circumvent the growing clampdown on excessive City pay. 

A brewing pay row

However, revenues across the investment banking industry are likely to have fallen by a fifth from 2009 after governments around the world scaled back the unprecedented support they poured into the financial system last year.

Deepening concerns over the debt crisis gripping the eurozone has also triggered a major slowdown in trading volumes at RBS's investment bank.

Given that the group's fixed salary costs have risen and its revenues have fallen, the bailed-out lender will have no choice but to increase the 'compensation ratio' from last year's 27 per cent to around 35 per cent this year, sources said.

Any rise in the portion of revenues RBS pays to its trading staff will intensify the political furore over excessive pay in the Square Mile at a time when public spending is being cut.

It is understood that RBS asked the Government for permission to begin paying cash bonuses to its investment bankers for the first time since the group's taxpayer rescue in 2008  -  but with a ceiling set at around £50,000.

Len McCluskey, Unite general secretary elect, said: 'The actions of these bankers over the last three years have laid bare their inability to grasp the public disgust at their behaviour as they continue to line their pockets with inappropriate and excessive bonuses.'

A meeting between Business Secretary Vince Cable, George osborne and the heads of RBS, lloyds, HSBC and Barclays had to be postponed yesterday after the Chancellor was stranded in New york.

RBS (up 0.54p to 38.52p), which declined to comment on the resumption of cash bonuses, has argued that it risks losing its top talent if it cannot pay its investment bankers the going rate.

More than 100 bankers at the group's investment banking wing were paid a bonus of at least £1m last year  -  even though the Edinburgh-based giant racked up £27.9bn of losses during 2008 and 2009.

But in an extraordinary admission, RBS chairman Sir Philip Hampton recently declared: 'We're paying many people who aren't worth it.'

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