Royal Bank of Scotland plans to pay £588m in staff bonuses despite suffering an £8.24bn loss for last year.
The size of the bank's bonus pool fell 18% from last year. Ross McEwan, chief executive, said the figure for bonuses was "highly emotional" but that he had to pay people close to the market rate.
"I need to pay people these people fairly in the marketplace to do the job. I do need to make sure we are there or thereabouts and that is all I'm asking for," he said.
The loss was caused by £3.84bn of costs for settling litigation and regulatory problems, including compensating payment protection customers in the UK, and £4.5m of losses for setting up a unit for bad assets.
McEwan, who took over from Stephen Hester in October, said RBS needed to regain the trust of its customers and the public. His plan to turn the company around includes:
• Shrinking RBS from seven businesses into three: personal and business banking, commercial and private banking, and corporate and institutional banking.
• Simplifying products for retail and small business customers, including scrapping "teaser rates" and 0% credit card transfers.
• Cutting costs because the bank is "too expensive and too bureaucratic".
Bankers' bonuses continue to plague the industry amid public uproar over past misconduct.
McEwan said his plan would take up to five years to complete, casting doubt on the government's ability to sell its 81% stake any time soon. McEwan said any sale was for the government to decide but that he was concentrating on making the bank trusted again.
He said 0% transfers and other introductory rates were "abhorrent" and that customers hated them. It was wrong to chase a new customer and "dump them" months later instead of giving the best deal to an existing customer.
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