The boss of Lloyds Banking Group (LSE: LLOY.L - news) would receive multimillion pound bonuses only if the taxpayer's £17.5bn investment returns to the black, under plans being discussed by its board.
Sources tell me that the Lloyds remuneration committee is drawing up plans to pay Antonio Horta-Osorio an annual bonus for last year of approximately £1.5m, about two-thirds of the maximum possible payout.
And directors of the state-backed bank are in advanced talks about a new structure for rewarding Mr Horta-Osorio, who has run Lloyds since 2011.
The scheme, which I understand will be discussed with UK Financial Investments and other leading shareholders later this month, would see Mr Horta-Osorio awarded future bonuses only if the Lloyds share price closes above 73.6p on a to-be-agreed minimum number of trading days.
The 73.6p figure is widely-regarded as the level at which the Treasury bought into Lloyds in 2008 when it rescued HBOS, although it does not take account of the billions of pounds paid in fees by the bank to the Treasury for other forms of government support. If those fees are taken into account, the so-called 'in-price' falls to roughly 64p.
The proposal is designed to align Mr Horta-Osorio's financial interests more closely with those of taxpayers - and Lloyds directors hope that it will defuse a possible row over his remuneration.
Last year, Lloyds shares were among the best-performing in the FTSE-100 index and the European banking sector, despite the fact that it was forced to set aside billions of pounds more to compensate customers who were mis-sold payment protection insurance.
Mr Horta-Osorio is regarded by City investors as having done a capable job during the last year, accelerating lending to small businesses and substantially reducing customer complaints about the bank.
Insiders cautioned that final decisions have not yet been taken about the size of the bonus or the new structure and would not be until later this month. Lloyds reports its annual results on March 1, when it is expected by City analysts to announce a loss of more than £1bn for 2012.
If approved, the new bonus scheme would come into effect immediately and cover Mr Horta-Osorio's potential bonus for 2012, as well as subsequent annual awards.
It could also be extended to include other senior executives although such a move has not yet been discussed.
Under the terms of his contract, Mr Horta-Osorio is eligible for an annual bonus worth 225% of his £1.061m salary, equating to about £2.3m. He is also eligible for a long-term share award worth about £3m, subject to deferral periods, for each year of service.
People close to Lloyds pointed out that Mr Horta-Osorio's bonuses would be deferred for at least three years even if the bank's share price reached the Government's 'in-price' long before then.
Lloyds shares are trading at around 51.5p, giving it a market value of nearly £37bn.
Sir Win Bischoff, Lloyds' chairman, and Mr Horta-Osorio are expected to be quizzed about the latter's bonus when they appear before the Parliamentary Commission on Banking Standards later. Sir Win is likely to stress that no decisions have been taken.
The Lloyds boss and his counterpart at HSBC (LSE: HSBA.L - news) , Stuart Gulliver, could face pressure to relinquish any award following the decisions of his counterparts at Barclays (LSE: BARC.L - news) and Royal Bank of Scotland (LSE: RBS.L - news) to waive their 2012 bonuses.
Lloyds declined to comment.