RBS to pay large cash bonuses despite public outrage

RBS will still pay large cash bonuses to its top performers this year, despite the political and public backlash over bankers’ pay.

The bank wrote to investors yesterday detailing its pay deal, which will give bankers their bonuses entirely in shares – but a large portion of these can then be converted into cash within just 12 weeks.

In the letter, written by the chairman of RBS’ remuneration committee Colin Buchan, the bank admitted that the deal was “unlikely to please everyone” but said it was a “well-intentioned attempt to reach an acceptable position for most parties”.

Stephen Hester, RBS’ chief executive, previously said it was necessary to pay bonuses to be able to attract and retain top talent.

The bank’s “senior management” will have their bonuses deferred in three equal tranches over three years, starting this year. The next management level down will receive 50% of their deferral this year followed by 25% next year and 25% in 2012.

Although the bonuses will be paid in shares, bankers will be able to sell them for cash in June. Politicians argued that this was breaking the spirit of the agreement announced by chancellor Alistair Darling in November, which promised no cash bonuses this year at RBS or Lloyds Banking Group, the Telegraph has reported.

The letter said the final size of the bonus pool had not yet been decided, but analysts expect it to be in the region of £1.5bn – up roughly 50% from last year.