RBS wants to pay its bankers $3 billion for their performance in 2009, but they might not be able to.
The UK’s Treasury Secretary Alistair Darling has the right to veto the bank’s bonuses, however if he does, the RBS board is threatening to quit.
The bank has generated around $12 billion in profit this year, but 70% of RBS is currently owned by taxpayers.
BBC reports: “The board believes that up to half the intrinsic value of the bank is in its investment bank. So if the chancellor were to veto bonuses which the directors believe to be essential to preserving that value, they would be under a legal obligation to quit – because they would be prevented from taking actions they perceive to be in the interests of shareholders.”
Darling now has two choices. Pay the bonuses and face taxpayers’ harsh criticism, or refuse to pay them and fix the problems that will come along with owning 70% of a bank with no board.