Royal Bank of Scotland (RBS) is examining proposals to claw back up to £100m from pay deals previously awarded to executives in its investment bank as it prepares to settle allegations that it played a key role in the Libor rate-rigging conspiracy.
I understand that the bank’s remuneration committee, which is chaired by Penny Hughes, a non-executive director, is assessing plans for a “flat tax” on the pay packets of hundreds of directors and managing directors in its markets business.
The idea would involve about 15% of prior-year pay awards to the relevant individuals being clawed back, netting a total of as much as £100m.
The proposal is one of several being scrutinised by the pay committee as it attempts to demonstrate that RBS staff are being held sufficiently accountable for the latest in a series of scandals involving the state-backed lender.
No decisions have been taken yet about the precise structure of the plan to reclaim bonuses previously awarded to staff, but if the RBS board gives the new proposal the green light, it would mean a far larger number of the bank’s employees having their bonuses docked than was previously thought.
RBS is expected to pay between £250m and £300m to staff in its Markets and International Banking (M&IB) unit for their work in 2012, a figure that has also been reduced in anticipation of the imminent Libor settlement.
People close to the bank said that an announcement of its penalties for rigging Libor had been provisionally scheduled for February 7, although the date has already been moved several times because the negotiations between RBS and regulators in the UK and US are not yet finalised.
Regulatory sources said that the FSA was continuing to push for a tougher settlement with RBS, while the bank had “all but” reached an agreement with the Commodity Futures Trading Commission, one of the leading US authorities. Talks with the Department of Justice are continuing.
Insiders said the total amount that RBS would pay to regulators could be as low as £400m, 20% lower than the figure suggested by recent media speculation.
John Hourican, chief executive of the M&IB business, is to leave RBS as part of a restructuring of the unit. He is owed £4m in deferred share awards but faces pressure from the Treasury to give them up despite the fact that he was not aware of, or involved in, any Libor-related abuse.
RBS declined to comment on its remuneration plans.