RBS Group can confirm that it has reached agreement with the UK Government as majority shareholder (through UK Financial Investments) on its approach to Pay and Reward for 2008/09.
The outline of the approach is as follows:
* No Reward for Failure: No bonuses or pay increases will be made to staff associated with the major losses suffered in 2008.
* Board Remuneration: As previously announced Board Executive Directors will receive no bonus for 2008 performance and no pay increase in 2009.
* Pay 2009: Agreement has been reached with Unite in the UK for staff which they represent below managerial grades. Ongoing discussions with staff representatives are taking place in other regions. This will mean a pay freeze for Directors and Executives in the Group worldwide, and for most staff in the US and the Global Banking & Markets division. On average, other staff will receive below inflation pay rises.
* Bonuses for 2008: No discretionary cash bonuses will be paid in 2009 for performance in 2008. Only legally binding guaranteed bonuses will be paid. Total cash bonus payments for 2009 will amount to 175m. Therefore total cash spend overall will have been reduced by more than 90%.
* Protection for lower paid staff: The existing Profit Share “bonus” scheme worth 10% of salary will not be paid for 2008, and will be terminated for all future years. An equivalent payment will be made as part of the existing monthly award package to staff below managerial grade, beginning in 2009. The average salary for this group is 18,979.
* Deferred awards: Staff who are essential to the bank’s recovery and who might otherwise be at serious risk of leaving, and who remain with the Bank will receive a deferred award for 2008. The deferred award will be released in three equal annual instalments beginning June 2010 and payable in sub-ordinated debt of RBS i.e. not in cash.
* Claw back of deferred awards: In individual cases up to 100% of these deferred awards will be subject to forfeiture at the discretion of the Remuneration Committee and if future losses arise in relation to their 2008 activities. Awards will therefore be based on sustained long-term performance, not on short-term revenue generation.
* Deferred Amount: The total amount of deferred awards will be finalised following our forthcoming company announcement relating to the Group’s Strategic Review. However, the total amount will represent a very significant reduction on the comparable prior year totals and the settlement overall will be as tough as that at any other comparable bank.
* Future Policy: RBS is undertaking a fundamental review of its approach to future remuneration to ensure that incentives are well aligned to the interests of shareholders over the long-term. The intention for 2009 is to follow the same approach and deferral periods as outlined for 2008 while ensuring the Group pays competitively overall with other international banks.
D.C.