RBS forced to back down from double fixed-pay plan

Majority state-owned Royal Bank of Scotland has axed a plan to hand out bonuses worth double fixed-pay after the British government refused to back it.RBS said on Friday that it would not ask investors to back a variable remuneration rate of up to 200% of salaries, or two-for-one ratio, at its annual meeting after UK Financial Investments (UKFI), which oversees the government's 81% stake in the bank, refused to support it.A higher bonus cap at RBS, which is still in the red after receiving a taxpayer bailout following the credit crunch, was not justifiable, the Treasury said.RBS said it still believed it needed the flexibility to pay variable awards of up to 200% of fixed pay, which is the maximum that banks can pay with shareholder approval following the introduction of new European rules.But it said it realised the proposal would fail without UKFI backing and had therefore withdrawn it."The board acknowledges that this outcome creates a commercial and prudential risk," RBS said in a statement.RBS said in its annual report on Friday that its bonus pools had fallen 58% in the last four years and by three-quarters within its markets division.But it still plans, in common with rivals, to pay so-called fixed allowances of shares worth 100% of salary to a "small number" of key staff, which has sparked criticism that banks are trying to get round the new EU rules.Its Chief Executive Ross McEwan has declined such an allowance this year but is eligible to receive it next year.Pay committee boss Penny Hughes said: "If RBS is to thrive we must do what it takes to attract and keep the people who will help us achieve our goals. We think the right positioning of the business is to be commercial."While we are sensitive to public opinion, particularly given our ownership structure, the ability to pay competitively is fundamental to getting RBS to where we need it to be."The move comes amid renewed controversy over banking bonuses after shareholders at Barclays on Thursday cast nearly a quarter of votes against a planned increase in its bonus pool to £2.4bn.The Treasury has agreed to support state-backed Lloyds Banking Group paying bonuses worth double fixed pay, however. Ministers have begun selling off the taxpayer's stake in Lloyds.PW