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RBS 'still has a long way to go' to rehabilitate itself

Royal Bank of Scotland has been making progress in restructuring itself. Credit: Johnny Green/PA Wire

The Government has made sure top bankers at Royal Bank of Scotland will get much lower bonuses than they might have expected.

Using its 81 per cent shareholding administered by the UKFI, the Government has effectively blocked RBS from awarding bonuses any higher than 100 per cent of base salary.

Banks have to ask for permission from shareholders to raise this to 200 per cent and RBS's competitors (including Lloyds, of which taxpayers still own almost a quarter) have all done so.

RBS has warned this morning that the decision means it is now seriously hampered - in a statement it says it now faces "commercial risk."

In other words, now that its senior executives are likely to be paid far less than they could get at other banks, the top staff who bring in money for the bank may well walk.

Senior executives RBS are likely to be paid far less than they could get at other banks, Credit: Tim Goode/EMPICS Entertainment

In other words, now that its senior executives are likely to be paid far less than they could get at other banks, the top staff who bring in money for the bank may well walk.

I¹m told the Government's decision was conveyed to RBS yesterday, the very day that executive at another banks, Barclays, got a very public roasting from some of their shareholders for high levels of executive pay.

Public anger is running high and the politicians have decided they need to act.

In a statement this morning, the Treasury says RBS "has not yet completed its restructuring and remains a majority publicly-owned bank. So an increase to the bonus cap cannot be justified."

Adding to this, the chief executive and his number two, the head of finance, have decided they are in for a penny, in for rather fewer pounds.

Royal Bank of Scotland chief executive Ross McEwan. Credit: Andrew Milligan/PA Wire

They are both to forgo their bonuses altogether in an effort to remove themselves from the political heat over pay - described to me by someone at RBS as an "obsession".

How much impact all this will actually isn't clear. Although the top staff won't get the mega bonuses they might have hoped for, RBS - like almost every other banks - is getting around the rules by making fixed allowances, a monthly top-up to salary which doesn't count towards the caps.

Some staff could find they are no worse off at all.

RBS is a troubled bank which is making progress in restructuring itself to match the UK-focus that the Government wants and it is making some steps in rehabilitating itself.

As the Treasury makes abundantly clear today, it still has a long way to go.