Royal Bank of Scotland (RBS) traders will be hit by bonuses cut, as the bank tries to cover the cost of the anticipated £350m fine related to libor rigging scandal. The bank has also threatened traders that bonuses will be hit if it is found that former awards were made out of inflated profits.
The regulators have instructed banks to reduce the bonuses this year to build up capital reserves to cover potential fines and compensation for past malpractices. Though the amount of fine that will be levied upon RBS is still unclear, its chief Stephen Hester has said that the settlement is likely to be reached by the end of February.
The bank paid out £785m in bonuses to staff last year, despite posting £2 billion losses. However, this year, traders at RBS are also said to have been told the bank may confiscate earlier bonuses that are due to be paid in the new year. RBS declined to comment.
It may be noted that a few days ago UBS was slapped with a whopping £940m fine in connection with the libor-rigging scandal, which was alo three times more than the fine paid by Barclays which was £290m.
RBS is negotiating with regulators in Japan, Singapore, the UK and US over claims that it was involved in manipulating the rate that governs the price of more than $500 trillion (£309tn) of loans and transactions, including household mortgages.
RBS has been riddled in controversies throughout the year. An IT glitch in June that locked out many RBS, Natwest and Ulster Bank customers which cost the bank £175m. RBS’ bill for mis-sold payment protection insurance claims reached £1.7bn last month.
Meanwhile, The Bank of England has indicated that bankers pay will face further restrictions, as it wants awards to be made in debt rather than equity and to be held for more than the current three year period.