RBS risk fuelling pay row as it considers how to avoid EU bonus cap

Bank which is 81% owned by taxpayers is keen to keep pace with Barclays and HSBC, which plan to hand out 'allowances'

Royal Bank of Scotland risks fuelling the row over pay as it considers how to follow rivals that have devised ways to avoid the EU bonus cap and maintain their bankers' multimillion-pound pay cheques.

The 81%-taxpayer-owned bank is keen to keep pace with rivals such as Barclays and HSBC, which are both planning to hand out new allowances, which are not classed as salary and therefore do not get included in the calculations used in the bonus cap. They have been introduced to ensure bankers do suffer any reduction in pay as a result of the bonus cap being imposed by Brussels.

Data published by the European Banking Authority last year showed that the average banker based in London received a bonus of 370% times their salary – indicating the impact that the bonus cap would have on pay.

Labour on Wednesday blew open the debate on the bonus cap, which came into effect at the beginning of this year and which George Osborne opposes. The cap limits the bonuses of the most senior bankers to 100% of their salary, unless the bank that employs them wins specific approval from its shareholders to pay bonuses of 200%. Labour called on the government to clamp down on bonuses at the loss-making, bailed-out bank and use its 81% stake to ensure that none of the RBS bankers will get 200% bonuses.

RBS admitted on Wednesday night it was consulting shareholders about pay, but insisted no decisions had yet been made.

All the major banks are expected to ask their shareholders for permission to pay bonuses twice the size of their top bankers' salaries at their upcoming annual general meetings. They are also looking at ways to pay their staff even more by making payments in addition to their salaries.

HSBC, for instance, is ready to hand out share awards to 1,000 or so of its more senior staff alongside their salaries and annual bonuses. Barclays also intends to hand its investment bankers monthly allowances to maintain their overall level of pay.

The other bailed-out bank, Lloyds Banking Group, is also expected to seek approval to pay out bonuses of twice salaries and look at ways of maintaining pay levels by using some form of additional payment. Such a move would also require approval from UK Financial Investments, the body that controls the taxpayer's stake in the bailed-out banks and still owns 33% of the shares after selling off a tranche last year.

Vince Cable, the business secretary, called on RBS to show restraint and urged it to consider the business models used by other banks that do not pay bonuses. He cited the Swedish bank Handelsbanken, which does not pay bonuses and instead uses a profit-sharing system called Oktogonen, which pays out when individuals turn 60.

"What I would say to RBS is they need to show restraint. They are changing their overall banking strategy. Instead of being a global bank aimed at investment banking they're now thinking about being a British bank aimed at British customers and British business. They should look at other models like Handelsbanken, in Sweden, which is very successful and has branches in Britain and doesn't have any bonuses at all," Cable told ITV.

Handelsbanken's UK offshoot has been unable to make Oktogonen allocations to staff for the past three years because of a dispute with HM Revenue & Customs about whether it is disguised remuneration – pay that is not being taxed.

The business secretary insisted that the government had not yet seen any proposals from RBS about its plans to tackle the bonus cap and referred to remarks by David Cameron warning about the bonus rules leading to increases in salaries to allow staff to receive the same amount of money.

"I think that's a legitimate concern that we can take into account,' Cable said.

"Most banks will be trying to get the cap lifted to 200%," said Greg Campbell, employment partner at the law firm Mishcon de Reya. Campbell said there had already been major changes to pay, when in the past bonuses across the City might have been as large as 10 times salary.

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World Bank: Global economy at turning point

The global economy is at a "turning point",the World Bank has said, as it forecasts stronger growth for 2014.

In its annual report on the world economy, the bank said richer countries appeared to be "finally turning a corner" after the financial crisis.

That is expected to support stronger growth in developing economies.

But it warned growth prospects "remained vulnerable" to the impact of the withdrawal of economic stimulus measures in the US.

The US Federal Reserve has already begun to wind down its monthly bond-buying programme, previously set at $85bn (£52bn) a month.

'Crisis risks'

There is concern this could push up global interest rates, which could affect the flow of money in and out of developing countries and lead to more volatile international financial markets.

The World Bank warned that some developing countries "could face crisis risks" if the unwinding of stimulus measures was accompanied by market volatility.

"Growth appears to be strengthening in both high-income and developing countries, but downside risks continue to threaten the global economic recovery," said World Bank group president Jim Yong Kim.

"The performance of advanced economies is gaining momentum, and this should support stronger growth in developing countries in the months ahead. Still, to accelerate poverty reduction, developing nations will need to adopt structural reforms that promote job creation, strengthen financial systems, and shore up social safety nets."

The bank forecasts that global GDP will grow by 3.2% this year, up from 2.4% in 2013, with much of the pick-up coming from developed economies.

Developing nations will grow by 5.3% this year, up from 4.8% in 2013.

In an interview with BBC economics correspondent Andrew Walker, World Bank economist Andrew Burns acknowledged that Brazil, Turkey, India and Indonesia were among the countries that could be vulnerable to the impact of US stimulus withdrawal.

However he also noted that the first concrete steps taken by the Federal Reserve to cut back its programme of buying financial assets last month did not severely disturb the markets.

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Inflation finally falls to Bank of England's 2% target

Surprise drop in December hits mark for first time in four years, helped by a smaller rise in food prices and early sales discounts

Inflation unexpectedly fell in December, returning to the Bank of England's 2% target for the first time in four years.

A smaller rise in food prices compared with a year earlier offset a rise in petrol prices and the well publicised increases in gas and electricity bills. High-street discounting in the weeks before Christmas also helped lower the inflation rate, economists said, with toy and computer game prices falling .

The surprise fall drove the consumer prices index to its lowest level since November 2009, when it stood at 1.9%, the Office for National Statistics reported. Inflation has fallen sharply since June's high of 2.9%, and economists had expected it to remain unchanged last month at November's 2.1%.

Chris Williamson, chief economist at Markit, said inflation was likely to remain "close to, if not below, the 2% target for some time to come".

The fall in CPI inflation will be a source of relief for the Bank's monetary policy committee, under pressure to justify its ultra-loose policy stance despite economic growth and falling unemployment in recent months.Interest rates have been on hold at an all-time low of 0.5% since March 2009.

"Talk of higher rates has increased in recent weeks because the Bank of England has been wrong-footed by the strength of the economy," Williamson said.

A Treasury spokesman said the fall was "another sign that the government's long-term economic plan is working".

He added: "But the job is not done and times remain tough for many people. So an important part of the government's plan is helping hard-working people be more financially secure by increasing the tax-free personal allowance and freezing fuel duty and council tax."

Consumers will be hoping that lower inflation will raise the prospect of higher wages, which have been persistently outpaced by rising prices.

Catherine McKinnell, the shadow economic secretary to the Treasury, said that for now, household budgets in Britain remained under pressure: "This small fall in the inflation rate is welcome, but with prices still rising more than twice as fast as wages the cost of living crisis continues. After three damaging years of flatlining, working people are on average £1,600 a year worse off under the Tories."

Average annual wage growth, in the three months to October – the latest official data – was up 0.9%. The retail prices index, more broadly based than CPI and often used as a guide for wage bargaining, rose to 2.7% in December from 2.6% in November.

John Allan, national chairman of the Federation of Small Businesses, said December's fall in CPI inflation was a welcome relief for hard-pressed households and businesses. "With the economy now growing, our members will be pleased that pressures on the cost of doing business are easing, though some concerns over rising fuel and in particular energy costs remain," he said.

Consumer price inflation averaged 2.6% in 2013, the lowest since 2009 and down from 2.8% in 2012. The December inflation data confirmed the trend of easing food price inflation – driven by lower prices for food and meat – highlighted last week by the British Retail Consortium.

The BRC said food price inflation slipped to a three-year low in December, while overall shop prices fell for the eighth month running in December.

With deep discounting as shops battled for hard-pressed customers the drop in prices of 0.8% on a year earlier was the deepest deflation since the BRC's data began in December 2006.

Andrew Sentance, senior economic adviser at PwC, said the challenge was to keep inflation on target.

"Stronger growth here in the UK could push up wage costs and a rebound in the global economy is likely to push up energy, food and commodity prices once again. So we cannot be sure that this return to the inflation target will be sustained through 2014," said Sentance, also a former member of the Bank of England's monetary policy committee.

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us also On Facebook

New London finance jobs rise for first time since early 2012

The number of new financial services jobs in London rose for the first time in almost two years last month, research showed on Monday, which recruiters said was a sign that banks are starting to think about growth after years of restructuring.

However, the number of jobs created in the whole of 2013 fell 21 percent compared with the year before as the financial jobs market still struggles to recover from the effects of the financial crisis, after which a number of banks cut jobs or pulled back from certain activities to reduce costs.

In December, 1,340 new jobs were created in the City financial district, up by two thirds versus the same month in 2012, according to research by recruitment firm Astbury Marsden. It was the first time in 22 months there had been a year-on-year monthly increase, the study said.

Investment banks created 67 percent more jobs than in December 2012.

Astbury Marsden said steady trading volumes encouraged City firms to continue to support growth in equity and derivatives trading and a buoyant shares listings market encouraged banks to devote more resources to deal-making and execution teams.

The total number of roles created in 2013 fell to 27,915 from 35,115 created in 2012, the research showed.

Astbury Marsden said there were some positives to be taken from the fact that the rate of shrinkage had slowed, however, as total new roles in 2012 had been 35 percent behind 2011.

"What we are seeing is very far from a return to aggressive hiring, but it is a good sign that banks are thinking again about growth," Astbury Marsden's Chief Operating Officer Mark Cameron said.

Separate research released last week suggested financial services institutions are finding it increasingly difficult to find the right staff to fill roles and to keep top talent on board.

TALENT BATTLE

In a survey conducted as part of recruitment firm Robert Half's Salary Guide for 2014, almost all of the 100 executives asked said it was a challenge to find skilled financial services professionals and 95 percent said they were concerned about losing top performers.

A similar number said they were worried about losing top talent to international competitors as a result of the European Union bonus cap, which limits bonuses to no more than annual salary, or twice that with shareholder approval.

Bonuses and executive compensation are particularly thorny issues in Britain, where many believe high levels of pay encouraged the excessive risk taking that led to the financial crisis.

People struggling in the economic downturn have been infuriated by companies, particularly banks rescued by the government at the height of the crisis, which continue to award payouts many times the average wage.

Robert Half said almost two thirds of firms surveyed had already raised salaries by an average of 19 percent for top employees to counteract the crimp on bonuses, while six in 10 have also increased benefits for affected staff.

In November Barclays (BARC.L) unveiled a plan to give senior bankers additional monthly payments and last week an industry source said HSBC (HSBA.L) is considering handing out new share awards to around 1,000 top-ranking staff.

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us also On Facebook

Tackling your tax return: the pain-free guide

The deadline for filing is less than three weeks away – yet 40% of those in HMRC's sights have yet to fill in their tax return. We look at how to ease the pain

This weekend, thousands of people will be digging out their P60 certificate, bank documents and various other bits of financial paperwork after reluctantly concluding that they can't put off doing their tax form any longer.

Around four million people have not yet filed their self-assessment taxreturn – and the 31 January deadline is looming. By midnight on that date, you need to have filled in your form and returned it to HM Revenue & Customs, together with payment for any tax you owe for the 2012-13 financial year.

In all, more than 10 million people are due to file a return by the end of this month, and HMRC is currently receiving about 80,000 completed returns per day. Some of these are from people new to self-assessment or who haven't filled in a form for years, but have now been dragged back into the regime because of the new rules on child benefit that affect those earning more than £50,000 a year.

Even if you don't owe tax, you can't escape a fine if you miss the deadline. If your name is down to do a return and you are late, you will automatically be hit with a £100 penalty. There are additional penalties if you keep delaying, which could add up to £1,600.

You are too late to file a paper return now – you can only do so online. To send an online tax return you must be registered for HMRC online services, and that involves getting an "activation code" by post, which will take a few days to arrive. HMRC says that if you register by 21 January you should be able to meet the deadline for filing 10 days later.

Here, we round up some of the top tips for filling in your form, highlight the common mistakes and identify some of the things you may be able to claim for. We also look at how you may be able to free yourself from the annual chore of filling in a tax form.The form includes new boxes asking how much child benefit you received between 7 January and 5 April last year, and how many children you have. If you claimed the benefit between those two dates, you'll have received £263 for one child, £438 for two, and £612 for three.

The high income tax charge is 1% of the amount of child benefit for each £100 of income between £50,000 and £60,000, and it is based on your "adjusted net income", which is your total taxable income (ie, basic salary, plus any benefits such as a company car, plus any savings, dividend or rental income), minus things such as pension contributions and charitable giving. In other words, people can deduct the money they contribute to their pension from their headline salary, and in many cases this will be several thousand pounds per year – which may be enough to take them below the vital £50,000 threshold.

This means there are likely to be quite a few parents earning more than £50,000 – perhaps £53,000-£54,000, or even more in some cases – who, unbeknown to them, can continue to claim child benefit without having it clawed back later. There is a calculator you can use atgov.uk/child-benefit-tax-calculator

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us also On Facebook

Standard Chartered: shock departure of finance director Richard Meddings

Standard Chartered stunned the City when it announced the departure of its longstanding finance director Richard Meddings – previously considered a candidate for chief executive – and embarked on sweeping changes to its operations around the world.

Chief executive Peter Sands announced plans to merge the wholesale and consumer divisions in an attempt to energise the emerging markets bank, which is suffering its first profits slump in a decade. The move is likely to lead to job cuts.

He was forced to insist "I'm not going anywhere" after the departures and promoted the current boss of the wholesale division – Mike Rees – to become his deputy. Chairman Sir John Peace also had no plans to leave, said Sands.

One of the highest paid bankers in the industry after receiving nearly £35m in the past four years, Rees was immediately seen as the heir apparent to Sands, appearing to have usurped Meddings, previously regarded as the natural successor.

Amid concerns about the bank's financial strength the shares fell to their lowest level since it paid £415m to settle money laundering allegations in the US just over a year ago, though they recovered some of their losses to end the day down 2% at £12.83 after Sands insisted the bank was comfortable with its capital position.

Sands and Meddings, who insisted the decision to go was his own and taken in the Christmas holidays, had been credited with steering the bank through the financial crisis relatively unscathed until 2012's money laundering scandal in the US.

"It was totally my decision to leave," said Meddings, often a candidate on lists drawn up for top jobs at rivals. "After 11 years on the board of this bank and seven years as finance director it seems a natural time to step away," he added.

The bank was facing questions about the decision to keep paying Meddings his £800,000 salary until next year, as well as a potential bonus, even though he will leave in June. The 55-year-old is also walking away with unvested shares currently worth about £8m but whose actual value will only be known when they pay out over the next three years. Meddings' pension pot is likely to reach £7m by the time his 12-month contract expires next year.

Meddings had been caught up in the money laundering scandal when remarks by an unnamed bank official to a US colleague – "You fucking Americans" – were said have come from him.

Also leaving is Singapore-based Steve Bertamini, head of the consumer division, whose role is "falling away" according to Sands. Bertamini was hired in 2008 and the last £900,000 instalment of his signing-on fee will be paid in May – two months after he leaves the board. He will have his relocation to the US paid for by the bank, receive his £600,000 salary until this time next year and take away with him unvested shares worth £6m at current market values, although that value is subject to change .

Sands described both departing executives as "outstanding leaders" and "good friends" who would be missed. He said neither was receiving any form of payoff.

Last year it emerged regulators had required Meddings to be stripped of responsibility for the risk functions at the bank and Sandy Chen, analyst at Cenkos, said: "FD Meddings' departure is key – his position had already begun to erode at the end of last year, with risk oversight transferred from him to Peter Sands." Chen said later his concerns had been allayed and he had been reassured that further management changes were not on the way and that the bank could generate enough capital. Sands – chief executive since November 2006 – sought to quash speculation about a boardroom rift. "We remain very comfortable with our capital position and have no plans [for a rights issue of new stock]. We have a unified board which is fully behind the strategy".

Meddings said he had not decided what to do next and quipped he might consider financial journalism.

One investor said: "It's not an ideal world having a finance director leaving without a replacement".

There was speculation that Naguib Kheraj, one-time Barclays finance director and a non-executive at Standard Chartered, might be a candidate while head of strategy Anna Marrs was also cited by some.

Rees' salary will rise to £975,000 pounds from £735,000 in April although his earnings potential fall by 40%.

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Loans to business getting cheaper and more readily available, Bank says

Availability of credit to corporate sector increased significantly in fourth quarter of 2013, according to Bank of England

Hopes of an end to the prolonged fall in business lending were boosted on Wednesday when the Bank of England announced that loans were becoming cheaper and more readily available to the UK corporate sector.

In a regular update, Threadneedle Street said there were signs that credit conditions had eased for companies towards the end of last year.

"The overall availability of credit to the corporate sector increased significantly in the fourth quarter of 2013, according to lenders, and a further increase was expected in the first quarter of 2014," the Bank said. "Lenders reported that the availability of credit had increased for small businesses and large private non-financial corporations."

It added that the final three months of last year had also seen more credit become available for mortgages, particularly on homes with high loan-to-value ratios. A "significant" further increase in availability is expected in the first quarter of 2014.

The Bank said demand for credit remained patchy. Households and medium-sized businesses were taking advantage of the easier conditions, but demand from small businesses was flat and there was a slight increase in demand from big companies.

Threadneedle Street also reported lower interest rates for borrowers as measured by the spread between the official bank rate of 0.5% and the loan rates charged to individuals and businesses.

"Spreads on corporate lending fell in the fourth quarter, with significant reductions reported for medium-sized companies and large private non-financial corporations (PNFCs), and a slight reduction reported for small businesses. Over the next three months, lenders expected spreads to tighten further for medium-sized companies and large PNFCs, and to be little changed for small businesses."

Lee Hopley, chief economist at EEF, the manufacturers' organisation, said: "Steady improvements in credit conditions are continuing and the Bank's survey brings further signs that finance providers are making more credit available and risk appetite is increasing. However, the issue of cost is still lingering for smaller businesses. With a turnaround in investment on the cards for this year we will also need to see a real pick-up in net lending to businesses and fewer companies saying they have been discouraged from accessing external finance."

Howard Archer, economist at IHS Global Insight, said the pick-up in credit availability to companies was encouraging but had yet to translate into increased corporate lending.

"Indeed, latest data from the Bank of England shows that net lending to non-financial companies fell by £4.7bn in November. This was the sharpest drop since the series started in April 2011. Net lending had previously fallen by £1.1bn on October following a rare rise of £714m in September."

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us also On Facebook