Lloyds bosses to pocket huge bonuses for HBOS takeover

Published on Friday 4 December 2009 22:09

PRIME Minister Gordon Brown's pledge to clamp down on bonuses for state-dominated banks suffered a setback yesterday when it emerged Lloyds Banking Group will hand out generous perks to staff involved in the takeover of Halifax Bank of Scotland.

Hundreds of executives at the banking giant are set to get up to 80 per cent of their annual salaries in a three-year deal. The move will anger the 11,000 staff who have been sacked as a result of the merger and independent shareholders whose investments have been hit by the takeover of the beleaguered HBOS, a merger in which Lloyds TSB chief executive Eric Daniels and HBOS chief Andy Hornby were instrumental.

The bonuses have been approved by the Treasury's arms-length scrutineer, UK Financial Investments (UKFI). The government yesterday appeared reluctant to condemn any deals with the Treasury, only going as far as saying bonuses had to be handled with "restraint".

Downing Street also declined to criticise another bank, Barclays, for deciding to "compensate" bankers for their more stringent bonuses by paying them higher base salaries. The Prime Minister's official spokesman said: "How individual banks determine their remuneration is not for the government to say."

While Barclays has not received a bailout, taxpayers do own shares in the bank. The spokesman said: "The Prime Minister's view continues to be that we must have responsible banking and part of that is having remuneration systems in place that are actually proportionate and are aligned with the principles set out on a number of different occasions.

"Every bank in the UK will have agreed already how those arrangements are going to apply to them individually." Lloyds Banking Group confirmed the government had approved the bonuses, but stressed that the payments would be made in shares in 2012. All deals would also be in line with new agreements reached by the G20 on banking.

The latest row over bonuses comes after Lloyds was one of the banks criticised by the spending watchdog, the National Audit Office, for being set to fail its target on business lending. The other bank named in the report was RBS. Its bosses have also been implicated in a stand-off with government over the Treasury's threat to veto bonuses.

But yesterday RBS – on the brink of a showdown with the government – signalled it would pay only modest bonuses to staff. Insiders said any payouts would be at the "lower end" of the industry standard.

Shadow chancellor George Osborne repeated his call for an end to cash bonuses or bonuses in existing shares, saying: "There are serious questions here about what the government got in return for its money. We were promised there were lending agreements. They should not be paying out cash bonuses or large bonuses based on existing shares."

SNP MP Angus MacNeil said: "The era of footballer salaries on the trading floor must come to an end."

He added: "Public money absolutely should not be used to fund lavish bonuses for the already well-rewarded. If financial incentives are, as RBS claims, essential to attract talent, these should be offered in shares, to ensure the long-term prosperity of the bank."