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UK bank chief handed 9.6m pound pay deal

ROYAL Bank of Scotland, the partly nationalized British lender, is to unveil a pay package for CEO Stephen Hester worth up to 9.6 million pounds (US$15.8 million) after securing backing from investors, the Financial Times said yesterday.

The paper said negotiations over Hester's pay deal concluded last Friday after RBS Chairman Sir Philip Hampton won the approval of shareholders including UK Financial Investments, the body which manages the British government's 70 percent RBS stake.

"UKFI expects all awards to be based on long-term sustainable performance which rebuilds the businesses of the banks," the body said.

RBS has been at the center of investor and public anger over excessive pay in the banking sector, stoked by the taxpayer-funded bailout of lenders across the United States and Europe.

Hester would receive a 1.2-million pound salary, a projected 2 million pounds in annual non-cash bonus payments, and nearly 6.4 million pounds in long-term share options, according to the Financial Times.

Hester's package is dependent on targets including total shareholder return and absolute share price performance, and the maximum share grant would only be awarded if RBS shares passed 70 pence, the paper said.

Asked if finance minister Alistair Darling had been told about the pay deal, a spokesman for Prime Minister Gordon Brown said: "This is a matter for the RBS board ... But in their discussions with the RBS board, UK Financial Investments have been very clear that the awards must be based on long-term sustainable performance and that is the case with this proposed package."

Taxpayer returns

"Our objectives in relation to RBS are to ensure that the value of the business grows so that we can get the maximum possible return for the taxpayer," he told reporters.

RBS shares were down 1.1 percent at 36.8 pence yesterday morning in London trading, while the FTSE 100 share index was 1.5 percent down. At the end of July 2007, RBS shares traded around 490 pence.

Hester's package compares with basic pay of 1 million pounds plus a share award of up to 200 percent of salary handed to Eric Daniels, the new CEO of Lloyds Banking Group, which is 43.4 percent owned by the government.


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