Royal Bank of Scotland Could Hand £4m in Bonuses to Investment Banking Chief


A row could be brewing at Royal Bank of Scotland, which is due to hand bonuses worth around £4m to the head of its investment bank, John Hourican, whose departure is expected in the coming weeks.

The share bonuses are part of packages that were handed to Hourican after the 2008 bailout of the bank and deferred over a number of years.

His departure from the bailed-out bank has been the topic of speculation for many weeks ahead of a fine – possibly of £500m – that the bank faces from regulators in the UK and the US for rigging Libor. The Libor operation was part of Hourican's investment banking division.

The fresh controversy over City pay comes as brokers Tullett Prebon ceded to requests by some of its senior staff to defer their bonuses into the new tax year when the top rate of tax is falling to 45% from 50%. Around 5% of those eligible – earning over £150,000 – are thought to taken up the offer.

"We're between a rock and a hard place. Either we put in place the scheme as requested by our staff and run the risk of public opprobrium or we don't and our staff become less sticky," a spokesman for Tullett said. "The company believes that taxation should be a matter of law not moral suasion and/or public persecution, and Tullett Prebon is not a bank and has never required any state aid."

Investment bank Goldman Sachs pulled back from considering whether to allow its staff to defer their bonuses beyond 6 April – when the new tax year starts – in the face of criticism by the Bank of England governor, Sir Mervyn King, who described such plans as "depressing".

Insurance broker AON, however, is pressing ahead with allowing its top staff to defer their bonus payments.

At RBS, while Hourican is not implicated in the manipulation of the key benchmark rate – used to arrange prices on £300tn of financial products – there have been suggestions that his departure will be a way for the bank to show that senior bankers are showing accountability.

In addition, Hourican's role had been changing following a restructuring of the investment bank by chief executive Stephen Hester – who is due to receive £700,000 as a part-payment of previous bonus in March.

The investment bank is being split up under the restructuring – which will be the second in as many years – as the operation is slimmed down from the large pre-banking crisis business. Hourican's role at the head of the investment bank will no longer exist in the same way.

The scale of the fine that RBS will pay for rigging Libor is expected to be confirmed next week.

The bank is due to publish its full year results at the end of February when the bonus pool at the investment bank, down 70% in 2011, will be scrutinised for restraint. RBS declined to comment.

Powered by article was written by Jill Treanor, for The Guardian on Monday 28th January 2013 20.19 Europe/London © Guardian News and Media Limited 2010


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