Government approves £1.3bn of RBS bonuses
I have learned that the investment arm of the Treasury has written to Royal Bank of Scotland's board, giving formal approval for the bank to pay £1.3bn in bonuses in relation to its performance in 2009.
The letter from UK Financial Investment has been sent today.
Although the total value of these bonuses is less than half the £2.7bn paid by Barclays, RBS's bonuses are more controversial because the bank is 84% owned by taxpayers.
The Treasury is in effect sanctioning payments to individuals that run to millions of pounds in some cases, even though these bankers can be seen as state employees.
However ministers believe that if they were to veto the bonuses, there would be significant damage to the value of the bank - thereby impairing the prospects for taxpayers to get back the full £45.5bn the Treasury has invested in the bank.
The bonus payments will also infuriate some critics for the separate reason that Royal Bank suffered colossal losses last year.
Ignoring one-off factors, such as gains on Royal Bank's purchases of its downgraded debt, the bank is thought to have made a loss of around £5bn in 2009. The precise loss number will be unveiled tomorrow when the bank publishes its results.
In the previous year, the attributable loss at RBS soared to a UK corporate record of £24bn - due largely to the collapse in value of the rump of the Dutch bank ABN, which Royal Bank had bought.
The loss in 2009 would have been significantly greater if RBS hadn't generated colossal revenues in its global banking and markets division - where the bulk of bankers work who'll receive the biggest bonuses.
The chancellor demanded the right of explicit approval over bonuses to be paid by Royal Bank when he agreed to insure the bank against losses on its poorer quality loans under the asset protection scheme.
RBS's directors were deeply concerned about his involvement in what they see as a commercial decision that should have been kept out of politics.
As I disclosed last year, the directors were given legal advice that they would have to resign if the chancellor forced a pay policy on them which they thought would damage the business.
He has chosen not to countermand UKFI's judgement that the £1.3bn in bonuses proposed by Royal Bank is reasonable.
On Sunday, Royal Bank's chief executive, Stephen Hester, waived his entitlement to a bonus for 2009.