Two top UK banks are to offer their employees loans rather than bonuses.
Royal Bank of Scotland (RBS) Group – 70% owned by UK taxpayers – has announced that it will not award discretionary cash bonuses for 2008.
But to offer financial support to staff relying on the payment of bonuses, the bank will make awards in the form of subordinated debt – debt that ranks below other forms should the debtor default .
This will be deferred over three years and will be subject to clawback, should staff miss their targets.
RBS staff will be able to borrow only up to the amount not subject to clawback. Any borrowing will be subject to interest charges similar to those charged to retail customers for a secured loan.
A bank spokesperson said: “To allow staff to manage their finances, we have already said that we intend to allow staff to borrow against a portion of their deferred award.” The bank has yet to complete details for the scheme.
Lloyds Banking Group is to offer a commercial loan scheme for staff receiving deferred bonus payments as subordinated debt.
Most of Lloyds’ staff received a cash bonus, typically less than £1,000. The loan is part of a voluntary scheme and will be run on commercial lines.
