Banks Get Billions More For Bonus Crackdown

Royal Bank of Scotland and Lloyds Banking Group have agreed to clamp down on the bonuses they pay in return for receiving billions of pounds more from the Government.

The Treasury will inject almost £30bn of taxpayers' cash into the two banks, which were propped up by a bail-out during the global banking crisis.

The banks say their board members have agreed to defer bonuses for three years while those earning more than £39,000 a year will also get their bonuses deferred and will be paid in shares.

The measures were revealed as plans to break up the banks were confirmed.

The move was forced on RBS and Lloyds by the European Union in a bid to introduce more competition into the banking sector.

Chancellor Alistair Darling told Parliament the changes were "better for taxpayers, better for the banks and better for the economy".

Part-nationalised RBS will get £25.5bn and will put £282bn in toxic loans into a taxpayer-backed insurance scheme.

It will also sell off RBS-branded branches in England and Wales, its NatWest branches in Scotland, the Churchill and Direct Line insurance arm and parts of its investment banking business.

In a separate announcement, Lloyds says it will not participate in the Government's asset protection scheme after unveiling plans for a £13.5bn rights issue.

The share offer will be Britain's biggest ever rights issue.

The Treasury says both banks will be required to meet "tough conditions" on pay and lending and will honour their commitments to increase lending to businesses and homeowners by £39bn.

Sky's City editor, Mark Kleinman, said: "There's less money going into Lloyds than expected but it is a very significant day because Lloyds has managed to avoid the Asset Protection Scheme.

"The endgame for the taxpayer's involvement in the banking sector is not going to come for several years yet.

"It's only when the Government begins selling the shareholdings in the banks that we will see if we will really get our money back."

The union Unite warned that 25,000 jobs were at risk by the move.

National officer Rob MacGregor said: "The Government has saved the banks, now it is time to save bank workers."

Shadow chancellor George Osborne said the measure would cost the equivalent of £2,000 per family and was a "new world record as the single biggest bail-out of any bank anywhere in the world.