New RBS boss waives £2million bonus until 2015 as he aims to dodge row over fat-cat pay

• Ross McEwan, head of the retail bank, will start the top job in October 1
• He will not receive an annual bonus until 2017 at the earliest 
  
• UK taxpayer owns 84% of the bank after 2008 financial crisis
  

By Matt Chorley and Martin Robinson

Published: 02:10 EST, 2 August 2013 | Updated: 18:45 EST, 2 August 2013

New boss: Ross McEwan, current head of retail banking at RBS who will succeed Stephen Hester as chief executive from October 1

The new boss of Royal Bank of Scotland has waived his bonuses until 2015 – but will still receive a basic package of more than £1.3million a year.

The State-backed bank yesterday confirmed the appointment of its retail supremo Ross McEwan as chief executive, replacing Stephen Hester on October 1.

In a bid to avoid a fresh row over fat-cat pay, the little-known New Zealander has decided to forfeit his annual bonus worth up to £2million until 2015.

But he will still pocket a £1million salary in 2014, a £350,000 cash payment instead of a pension and up to £3million in long-term share awards which could pay out in 2017.

Mr McEwan was already lined up for a controversial ‘golden hello’ payment from RBS of about £3million when he was poached last summer from his role as retail chief at the Commonwealth Bank of Australia.

He received £1.6million of this last month, or £860,000 after tax, as compensation for share bonuses given up when he left his last job. The news comes as RBS posted a profit of £1.4billion for the first half of the year, up from a £1.7billion loss in the same period last year.

But profits at the core part of the bank actually fell, largely driven by a 61 per cent slump in its investment bank and a 7 per cent fall in the UK retail bank.

Deborah Hargreaves, chairman of the High Pay Centre, said: ‘It’s good that he is giving up his bonus. But most people would think that £1million is more than enough to live on and would question why someone running a State-backed bank needs a bonus in the first place.’

Chancellor George Osborne welcomed the new RBS boss, saying he was impressed by ‘his vision of RBS as a strong, UK-centred corporate bank that is focused on supporting the British economy’. RBS chairman Sir Philip Hampton said Mr  McEwan was the only candidate who had been offered the job and described him as a ‘great champion for customers’.

A woman walking past the headquarters of the Royal Bank of Scotland in the City of London as insider Ross McEwan was appointed today

Shares in RBS fell by 3.3 per cent to 322.5 yesterday, as the bank revealed it had set aside another £185million to compensate customers mis-sold payment protection insurance. This takes its total bill for the scandal to £2.4billion.

It has also set aside £385million to pay for future fines and lawsuits, including a likely fine from the European Commission for rigging Libor interest rates.

Mr McEwan becomes the latest foreigner to take a key role shepherding the British economy back to health, with Canadian Mark Carney starting his job as governor of the Bank of England last month.

Mr McEwan is believed to have ticked the boxes for RBS and the Government because of his strong credentials in retail banking. He owns a farm in New Zealand and is a keen cyclist.