Investment bankers at RBS awarded pay rises of up to 100%

Published on Tuesday 16 March 2010 20:23

ROYAL Bank of Scotland is understood to have given pay rises of up to 100 per cent to a number of investment bankers, as it fights to hold on to key staff.

Although not all of the bank's 16,800 staff in its investment banking division received increases, it is thought a number have been awarded significant rises to take effect from next month.

Other banking firms, including Citigroup and Barclays, have also awarded large pay rises to hold on to senior investment banking staff.

A spokesman for RBS said he couldn't discuss individual pay awards but added: "While we review salaries against market benchmarks, we treat each member of staff individually rather than making wholesale pay increases."

A fortnight ago, chief executive Stephen Hester told Scotland on Sunday that "motivation and retention of good people was my biggest challenge".

He said about 1,500 investment bankers had left last year – twice the number in a normal year – after finding jobs with higher pay or bigger bonuses.

Hester described the drift of staff to rival banks as "destabilising, but not destructive" and said he hoped he had reached an agreement on pay that would persuade more senior people to stay.

Recent high-profile departures have included Steve Ashley, head of RBS's lucrative rates trading division, and Andrew Foster, managing director for energy and resources at corporate broking unit Hoare Govett.

Despite the bank's continuing battle with losses, more than 100 staff will receive bonuses in excess of 1 million and at least two will get about 7m each as part of a 1.3 billion bonus pot for the bank's leading performers.

News of the pay rises came amid speculation that RBS is preparing a major restructuring of its balance sheet. It is understood one option could centre on a 10bn debt buy-back scheme using "contingent convertibles" – a financial instrument that can be used to provide capital at low cost and which also absorbs losses in times of stress.

Last year, Lloyds issued a similar bond, which converts into equity if the bank's Tier 1 ratio – seen as a key measure of capital strength – falls below 5 per cent.

Last week, Dutch bank Rabobank issued a 1.25bn (1.13bn) ten-year contingent bond.

When RBS's results were announced last month, its chief financial officer Bruce Van Saun said the bank expected to make a decision about the middle of March on a potential "liability management exercise" and added that it was considering a number of options.

"It is not an easy equation, with all the changing regulation around capital quantity and capital quality," said Van Saun. "We're certainly looking through that and considering what course of action we should take."

A spokeswoman for RBS said that no decision had yet been reached.