The UK government has Royal Bank of Scotland to pay bonuses worth double an employee's fixed salary, adding to the pressure on banks to rein in pay. Banks across Europe have come under fire from the public, shareholders and politicians for extravagantly rewarding staff at a time of austerity that was brought on in part by the reckless lending of some financial groups, according to Reuters.
Business Secretary Vince Cable this week wrote to banks and other big companies warning them to cut out excessive rewards or face tighter rules. He said banks needed to address "dangerous levels" of pay. Banks, however, argue they need to compete for talent with overseas rivals, particularly those in the United States.
The European Union has introduced a rule, which will apply to awards handed out from early 2015, that bankers' bonuses can be no higher than fixed pay, or twice that level with shareholder approval.
"RBS is heading in the right direction, but it has not yet completed its restructuring and remains a majority publicly-owned bank. So an increase to the bonus cap cannot be justified and the government made clear it would not have supported such a proposal," a finance ministry spokesman said.
With the prospect of losing a vote on its bonus proposal at its annual shareholder meeting in June, RBS said it was withdrawing it.