RBS/Lloyds bankers earning over 39k

[bogwoppit]

So it's now written in stone, as part of the bank breakup, rights issue etc Lloyds (and RBS) have agreed to not pay performance-related bonuses to any staff earning over 39k. A member of my family works in bancassurance, an income-generating aspect of the business where only the top performers get a bonus. Now that nobody will, is this not a stupid thing to be doing?

My question for you lot is: who does this mostly affect? Why did they set it at 39k, to catch sales people and managers, rather than in the hundreds to catch traders et al?

[Soovy]

Focus groups will have told the gubberment that the great unwashed see anything which begins with a "4" as a fatcat pay packet.

Therefore the communists in the gubberment have decided that by attacking anyone over that level they will wim more votes from the lazy bloodsucking underclass than they will lose from decent hard working people.


Next.

Edited by Soovy on Wednesday 4th November 13:12

[Fittster]

The communists via our taxes have spent Billions propping up RBS. Just let the thing go and be done with it.

If no one at RBS still has a job there will be no problems with bonuses.

[anonymous-user]

I thought the idea was to pay unlimited bonuses but in shares rather than cash so that performance has to be maintained? Basically like share options.

[Maxf]

Very short sighted IMO.

Those who would have earned bonuses will either look to move or start working to rule. The good staff of course will leave, so what are you left with? Mediocre people who couldn't do any better. Great.

Of course, salaries may increase to get the bonuses in 'by the back door', which makes the whole thing even more pointless.

[Maxf]

unrepentant said:

I thought the idea was to pay unlimited bonuses but in shares rather than cash so that performance has to be maintained? Basically like share options.

Kind of how most big bonuses are paid anyway?

[Fittster]

Forget the bonuses the problem is:

"In another dramatic day in a year of bail-outs, the taxpayer pledged a further £39.2bn of support to Royal Bank of Scotland and Lloyds Banking Group. The Government has also agreed to stand behind £282bn of RBS's toxic debts through the asset protection scheme (APS)."


Let capitalism do its work, if the government are so bad. I'm sure the market will ensure everyone gets what they deserve.

[AndrewW-G]

unrepentant said:

I thought the idea was to pay unlimited bonuses but in shares rather than cash so that performance has to be maintained? Basically like share options.

Yes its "only" the cash bonus thats been scraped, have to say it looks like a very very short sighted thing to agree to.

As always the Telegraphs Matt cartoon connects hammer and nail

Edited by AndrewW-G on Wednesday 4th November 13:20

[anonymous-user]

AndrewW-G said:

unrepentant said:

I thought the idea was to pay unlimited bonuses but in shares rather than cash so that performance has to be maintained? Basically like share options.

Yes its "only" the cash bonus thats been scraped, have to say it looks like a very very short sighted thing to agree to

It was the short term bonus culture that led to excessive risk taking and so to pay bonuses based on longer term performance sounds eminently sensible. If the company performs well the shares will rise in value and the recipient will do very well. It also encourages better team work as everyone has a vested interest in everyone elses performance.

[bogwoppit]

unrepentant said:

I thought the idea was to pay unlimited bonuses but in shares rather than cash so that performance has to be maintained? Basically like share options.

Share bonuses will still be paid, board members will defer theirs for a few years. But again, I would imagine it is the big earners who are paid mostly in shares, this is not the case for "normal" staff so these are the people being screwed. I don't know for sure but I think in my relative's case bonus is cash and shares are benefits rather than performance related. And to top it off these people are unlikely to be of sufficient stature to negotiate a bump in salary or a different format for their bonuses.

Politics is so infuriating.

[okgo]

39k??

Bloody hell, the average city salary is twice that..

[anonymous-user]

bogwoppit said:

unrepentant said:

I thought the idea was to pay unlimited bonuses but in shares rather than cash so that performance has to be maintained? Basically like share options.

Share bonuses will still be paid, board members will defer theirs for a few years. But again, I would imagine it is the big earners who are paid mostly in shares, this is not the case for "normal" staff so these are the people being screwed. I don't know for sure but I think in my relative's case bonus is cash and shares are benefits rather than performance related. And to top it off these people are unlikely to be of sufficient stature to negotiate a bump in salary or a different format for their bonuses.

I would imagine that "normal" staff earning over £39k who would have got a bonus will also get it in shares. So if your relative had an OT bonus of £10k he would get £10k worth of shares at the prevailing rate but would not be able to sell them for say 2 years. If the company pull together and the share price rises he will be quids in. If the performance of the company is crap and the share price falls he will lose out but in that scenario he probably didn't deserve a bonus anyway......

[AndrewW-G]

unrepentant said:

AndrewW-G said:

unrepentant said:

I thought the idea was to pay unlimited bonuses but in shares rather than cash so that performance has to be maintained? Basically like share options.

Yes its "only" the cash bonus thats been scraped, have to say it looks like a very very short sighted thing to agree to

It was the short term bonus culture that led to excessive risk taking and so to pay bonuses based on longer term performance sounds eminently sensible. If the company performs well the shares will rise in value and the recipient will do very well. It also encourages better team work as everyone has a vested interest in everyone elses performance.

I disagree slightly, people traded within the confines of the current regulations and made their banks money, which was after all what they were employed to do. Rather than attacking the workers in a rather indiscriminate way, the government should be regulating the products being traded. Competent regulation would have helped reduce the markets exposure to this risk.

The government conditions simply force the blame onto everybody working within the banks irrespective of where their sales were generated and the risks involved.

As for the £39k level, completely and utterly stupid, why not set it at £100k where realistically it may actually have they effect they want it to

Edited by AndrewW-G on Wednesday 4th November 13:34

[bogwoppit]

Fittster said:

Forget the bonuses the problem is:

"In another dramatic day in a year of bail-outs, the taxpayer pledged a further £39.2bn of support to Royal Bank of Scotland and Lloyds Banking Group. The Government has also agreed to stand behind £282bn of RBS's toxic debts through the asset protection scheme (APS)."

RBS yes, but I think it's being a little unfair on Lloyds. For a start, the government shall we say "highly encouraged" the purchase of HBOS without giving them a chance to ascertain the scope of their problems. Lloyds never wanted the bailout, have already paid some back and now they have to pay £2.5m to stay out of the government's debt insurance scheme. To raise money they are doing a rights issue, and the government is choosing to pay to maintain its holdings % just like other shareholders. The spin is just sickening.

[bogwoppit]

unrepentant said:

bogwoppit said:

unrepentant said:

I thought the idea was to pay unlimited bonuses but in shares rather than cash so that performance has to be maintained? Basically like share options.

Share bonuses will still be paid, board members will defer theirs for a few years. But again, I would imagine it is the big earners who are paid mostly in shares, this is not the case for "normal" staff so these are the people being screwed. I don't know for sure but I think in my relative's case bonus is cash and shares are benefits rather than performance related. And to top it off these people are unlikely to be of sufficient stature to negotiate a bump in salary or a different format for their bonuses.

I would imagine that "normal" staff earning over £39k who would have got a bonus will also get it in shares. So if your relative had an OT bonus of £10k he would get £10k worth of shares at the prevailing rate but would not be able to sell them for say 2 years. If the company pull together and the share price rises he will be quids in. If the performance of the company is crap and the share price falls he will lose out but in that scenario he probably didn't deserve a bonus anyway......

It's possible this will happen, but I would be willing to bet that the City boys will negotiate this and regular employees will have no chance. I can tell you that in his case, bonuses have already been cut and not redistributed as shares, so it seems unlikely. And this is for a sales job with very clear performance indicators that brings a steady stream money INTO the bank's coffers. We're not talking guaranteed bonuses, we're talking target-based earnings.

Unfortunately it's just too good an opportunity for the company to save cash and blame it on the government. Just look at all the pay freezes and cuts being handed out by profitable companies to take advantage of "the economic situation". Cruel, and bad business.

[Soovy]

One's bonus will be in deferred shares.


The Bank gives you an immediate interest free loan of cash to the value. When the shares vest, you pay the loan back.


SIMPLESH.

[Fittster]

bogwoppit said:

Fittster said:

Forget the bonuses the problem is:

"In another dramatic day in a year of bail-outs, the taxpayer pledged a further £39.2bn of support to Royal Bank of Scotland and Lloyds Banking Group. The Government has also agreed to stand behind £282bn of RBS's toxic debts through the asset protection scheme (APS)."

RBS yes, but I think it's being a little unfair on Lloyds. For a start, the government shall we say "highly encouraged" the purchase of HBOS without giving them a chance to ascertain the scope of their problems. Lloyds never wanted the bailout, have already paid some back and now they have to pay £2.5m to stay out of the government's debt insurance scheme. To raise money they are doing a rights issue, and the government is choosing to pay to maintain its holdings % just like other shareholders. The spin is just sickening.

I'm not sure I buy the 'Evil government forced HBOS on poor lloyds". Were their management really to weak to say no or too stupid to realise it was a bad deal?

Personnally I think Lloyds management thought "Ace, look at the market share we will have" and jumped at HBOS without doing their sums carefully.

Edited by Fittster on Wednesday 4th November 13:55

[youngsyr]

Soovy said:

One's bonus will be in deferred shares.


The Bank gives you an immediate interest free loan of cash to the value. When the shares vest, you pay the loan back.


SIMPLESH.

Doesn't work like that, the loans would be a benefit in kind and the employees would be taxed on the difference in interest between what they're charged (0%) and a reasonable rate of interest on a third party loan.

[jimothy]

From what the papers say (don't know the real facts though) its only executive bonises that are defered. Other bonuses are in shares, not options, and no mention was made of when you can sell them.

So surely they can sell the shares straight away and only pay 18% tax, not the full 40% and NI?

[youngsyr]

unrepentant said:

AndrewW-G said:

unrepentant said:

I thought the idea was to pay unlimited bonuses but in shares rather than cash so that performance has to be maintained? Basically like share options.

Yes its "only" the cash bonus thats been scraped, have to say it looks like a very very short sighted thing to agree to

It was the short term bonus culture that led to excessive risk taking and so to pay bonuses based on longer term performance sounds eminently sensible. If the company performs well the shares will rise in value and the recipient will do very well. It also encourages better team work as everyone has a vested interest in everyone elses performance.

This proposal highlights that those in power don't understand what they're dealing with.

I can't see how anyone can believe that trying to stop a problem associated with people dealing in complex financial derivatives by issuing the participants with a financial derivative instead of cash is anything but ludicrous?

The guys this is aimed understand how to create complex financial contracts to reduce risk and realise cash for God's sake!

For example, say they are granted XXX,XXX share options with an exercise date two years in the future that are worth £500K if they were able to sell at today's share price.

All they'll do is go straight to the market and either:

a) buy a put option at today's price (or a slight premium to recoup some of the cost of the option) with an exercise date in two year's time on the total number of their share options, meaning that they can't lose no matter what happens to the share price; or more likely

b) sell their options (or a derivative based thereon) for cash at a slight discount to the current value of their options, meaning that they get cash now and as soon as the options vest, the ownership transfers to the new holder.