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Lloyds said to maintain 2,000-pound restriction on cash bonuses
[LONDON] Lloyds Banking Group Plc, Britain's largest mortgage lender, is set to keep a 2,000-pound (US$2,906) restriction on cash bonuses until after the UK government has sold all of its shares, according to two people with knowledge of the matter.
The London-based lender is entering talks with UK Financial Investments Ltd, which manages the Treasury's stakes in bailed- out banks, as it seeks to finalize its compensation plans for 2015, said the people who asked not to be identified because the discussions are private. No final decision has been made, the people said.
Bankers' bonuses have been a political punching bag since the government bailed out Lloyds and Royal Bank of Scotland Group Plc, which is also subject to the pay cap, for a combined 65.5 billion pounds during the financial crisis.
Chancellor of the Exchequer George Osborne plans to sell Lloyds shares to the public this year and divest the government's remaining 9.2 per cent stake after raising more than 16 billion pounds by selling stock to institutional investors in a trading program.
UKFI typically approves the bank's pay plans after talks early in the year before Lloyds posts annual earnings, one of the people said. The bank is scheduled to report full-year results on Feb 25.
"We've hardwired the link between pay and performance, and left bankers in no doubt that their bonuses are at risk should any misbehavior occur," a spokesman for the Treasury said in an e-mailed statement. "The reforms the government has put in place since 2010 mean that Britain now has the toughest rules on bankers' pay of any major financial center."
Lloyds will probably allocate a similar group bonus pool to the 369.5 million pounds it set aside last year, according to the people. Although the bank's profitability has improved in the past year, it agreed to take about 30 million pounds out of the pot in June after it was fined a record 117 million pounds over its handling of complaints linked to payment-protection insurance.
The government has committed to selling Lloyds stock in the trading plan for at least 73.6 pence a share, the average price it paid bailing out the bank. The bank now trades at about 70 pence, potentially inhibiting a sale. Osborne has extended the program with institutional investors to the end of June and has kept the option of selling shares to the public, in a process expected in the first half of the year. RBS remains 73 per cent owned by the UK.