Royal Bank of Scotland: Bonus Time!
For fixing LIBOR interests the bank has been fined :
£87 Million to the Financial Services Authority;
$325 million to the United States Commodity Futures Trading;
$150 million to the United States Department of Justice.
Investigating authorities have found RBS “as a firm”, not involved in “deliberate misconduct”. Only “individual traders” and “their immediate supervisors” were involved. This is the latest response by the bank to the Libor rate fixing crisis. The bank claims to have looked at 11 million documents; interviewed over 100 employees; and identified 21 “wrong doers”. Most of the 21 have left or been disciplined.
With embarrassingly poor timing the 2010 long term incentive bonuses are due to be paid out over future weeks. Many of the bonuses, including those due to American employees, may not be paid in full. They may be subject to claw back. Indeed the bank has recently made much of this claw back as it shows the bank senior employees will suffer this cost, and not share-holders, including the government.
However, the long term incentive for the Chief Executive, will not be affected. About £780,000 will be paid in May.
The undisclosed full details of the criteria for these incentive payments include “financial and operational performance”, and “effective” risk management.
Given the size of the misconduct by the wrong doers, as measured by the above figures, surely the question is why should any incentive payment be given to anyone in the bank. One answer to this is the problem of the legal status of these incentives from 2010. Are they legally binding contracts? If so, can the payments not be given in whole, or in part, to charity? If they are not legally binding, why is the bank still making them?
All this raise questions about transparency. As this bank is largely state owned, tax payers should be able to find out the status of these agreements about incentives. There is no public clarity about which criteria, if any, have been met; and which have not. RBS still has questions to answer!