Lloyds chiefs feeling the chill as top 1,000 told their pay is frozen

LLOYDS Banking Group’s highest paid executives, including its recovering boss Antonio Horta-Osorio, have been slapped with a pay freeze as the taxpayer- backed institution also comes under pressure to take an axe to bonuses this year.

It is understood that the bank’s top 1,000 senior executives, including many stationed in Edinburgh, were told of the move last week.

It comes after Lloyds plunged to a £3.9 billion loss in the first nine months of the year, forcing it to warn last month that it may have to postpone some of its recovery targets until after 2014.

The loss was triggered by a £3.2bn write-down to cover the mis-selling on payment protection insurance (PPI).

Lloyds refused to comment last night but one insider stressed that executive pay was “very much linked to the performance of the business”.

The bank’s board is understood to be coming under pressure from the UK government, which owns a 41 per cent stake in Lloyds, to slash this year’s bonus pay-outs, particularly in light of the PPI mis-selling scandal.

Policymakers are said to be looking for a 50 per cent reduction in bonus payments to senior managers and directors following the recent profits dive.

Chancellor George Osborne will today rubber-stamp radical proposals to reform the UK’s banking system, despite warnings from the City that the recommendations of the Independent Commission on Banking could strike a further blow to GDP growth and cost the banking industry up to £7bn.

Business Secretary Vince Cable said yesterday that the commission’s proposals would be accepted “in full”, which will see banks having to ring-fence their retail operations and adhere to higher capital requirements.

There are some fears that the regulatory pressures upon the banks and the associated costs will force several – in particular HSBC – to relocate their headquarters abroad.

Royal Bank of Scotland is believed to be examining a sale or closure of its prestigious stock-broking business, Hoare Govett, in response to the stringent reforms as well as the desperate trading conditions of late.

The move is one of the options on the table as part of a major overhaul of its £450bn investment banking arm, which is likely to see the loss of thousands of jobs.

RBS has reportedly hired consultancy firm McKinsey & Co to advise on how best to scale back its Global Banking & Markets business.

The bank yesterday declined to comment on the potential disposal of Hoare Govett, which was acquired as part of the doomed takeover of Dutch bank ABN Amro.

But sources say the move was discussed at a board meeting last week along with several more-radical strategies, which could see the bank withdraw altogether from the equities market, including share trading, researching listed companies and broking for corporate clients.

It is understood the board is eyeing shrinking the investment bank by at least a third, which could lead to some 5,000 job cuts worldwide.

Canadian bank RBC has been suggested as a likely bidder if RBS does decide to press ahead with the Hoare Govett disposal.