Bonus payments shake up

Grovelawn Financial News 13/10/2008

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FSA highlights possible changes to bonus pay outs

In a move that financial analysts are saying is acutely humiliating, the government has had to bail out the UK’s major banks. Research revealed recently that bonus payments, unrelated to the finance sector have risen from £26.5billion to £28billion in 2007.

HBOS and RBS have been forced to accept the bail out that will spell the end of “fat cat” bonus payments.

The Government’s recent £500billion rescue package had failed and the announcement that the Government would take a substantial shareholding has angered many who feel the tax payer will be over burdened. Alistair Darling has said that the government had laid down “stringent conditions in relation to bonuses this year, making sure executives get rewarded for success, not failure.” He also said that the tax payer will ultimately benefit when the share prices of the banks increase in value over the coming months and years. The tax payer will gain around 60 Per cent of the RBS shares and 40 per cent of the HBOS/Lloyds TSB shares.

The shares in RBS where valued at £5.46 a year ago and are now only worth 65.5p each. The FSA’s chief executive Hector Sants said there was “widespread concern” that excessive bonuses had “contributed to the present market crisis”. An estimated £3.5billion is still expected to be paid out at the year end and the FSA would like to see a major proportion of the bonus to be made up of share options or to be linked in to other skills such as risk management. The FSA would also like to see a major proportion of a bonus to be deferred and paid over several years.

← Landsbanki put into receivership | News For October 2008 | Economists argue for extreme cut in base rate →

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