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January 29, 2013

RBS tips UK back into bonus debate

George Osborne is braced for a new political backlash over bank bonuses, as state-controlled Royal Bank of Scotland prepares to pay as much as £250m to staff at an investment banking division heavily implicated in the Libor-rigging scandal.

The chancellor’s discomfort has been amplified by the fact that the bonus round comes just as RBS prepares to settle with US and UK regulators over the Libor scandal with a fine expected to top £500m. The taxpayer will effectively be paying RBS investment bankers about £250m in bonuses, while simultaneously footing the bill for the bank’s abuse of Libor over a number of years up to 2010.

The majority of the Libor fine will be paid to US authorities. Although negotiations are not yet complete, those close to the talks say the British taxpayer could end up sending a cheque for more than £400m across the Atlantic. The bank, which is 82 per cent state-owned, is expected to pay about £100m to the Financial Services Authority.

One ally of Mr Osborne said the bonus row would not be “as high-octane” as in 2012, when controversy over chief executive Stephen Hester’s proposed £1m bonus raged for weeks, but conceded there would inevitably be a backlash. Mr Hester eventually turned down last year’s £1m bonus, and has also refused any payout this year after an IT blow-up that left millions of customers unable to use their accounts.”


Read full Financial Times article here

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