RBS hires two top bankers for £10m to rebuild its business

According to the sources, Royal Bank of Scotland has spent more than £10 million hiring two bankers, in a move that may further inflame the row over City bonuses. RBS, which is 70 % taxpayer-owned, has poached a star banker from Merrill Lynch Antonio Polverino on a £7 million one-year package. Its new finance director, Bruce Van Saun, is joining from Bank of New York Mellon next month on a multimillion-pound salary. Mr Van Saun was paid $9 million (£5.4 million) in 2007, his last full year at the US bank, and is expected to be paid a similar amount in his new job.

The packages are two of the most lucrative offered by RBS to attract star talent to rebuild its business after it almost collapsed last October and had to be bailed out with £20 billion of taxpayers’ funds. Last week, the RBS chief executive Stephen Hester admitted that his bank has offered controversial guaranteed bonuses to a handful of recruits that it hopes will be “rainmakers” who will help to turn its fortunes around. He justified the payments as necessary after RBS experienced a doubling in the number of top performers leaving the bank for rivals after its nearcollapse.

The Government forced RBS to adopt draconian rules on pay, including deferring bonuses over three years and a “clawback” clause in every contract, which allows the bank to take back the windfall if the individual incurs a loss. Mr Hester has a “no payment for failure” clause in his contract, but could earn about £10 million for 2009 if he hits performance targets and raises the RBS share price above 70p from its current level of 45p. Mr Van Saun, who collected $17.5 million when he parted company with Bank of New York last summer, and Mr Polverino will also have a “no payment for failure” clause in their contracts.

In addition, yesterday the Financial Services Authority published a code on pay that was attacked as too weak. The City watchdog insisted that its new rules would force banks to link risk to reward, but critics said that it had watered down the proposals.