RBS cuts up to 2,300 jobs

The Royal Bank of Scotland (RBS) has said it will cut a further 3,500 jobs, with most of them to happen this year.

The cuts are part of a reorganisation and shrinkage of its investment bank.

The losses, which will be split between its UK and international offices, come on top of 2,000 cuts announced earlier.

A further 950 jobs are also to go at Irish subsidiary Ulster Bank, split between 350 in Northern Ireland and 600 in the Irish Republic.

Meanwhile, rival Barclays said it will cut 422 UK jobs in its IT division.

RBS' "wholesale banking" business, which provides services to large clients including investment banking services, will be split into separate "markets" and "international banking" divisions.

The new markets division - which comprises RBS' main trading activities - will focus on the bank's traditional strengths of debt, currency and money markets, the bank said in its statement.

The international banking division will provide services for the bank's biggest clients.

These will include corporate advisory services transferred from its investment bank - such as helping major companies borrow money by issuing bonds - as well as cash management and payments services.

The bank has already shed some 30,000 employees over the last two years, 22,000 of them in the UK.

The £7.7m pay package awarded to Royal Bank of Scotland's chief Stephen Hester has been approved by the UK government.

UK Financial Investments (UKFI), which manages the taxpayer's 83% stake in RBS, gave its support despite a widespread backlash over the deal.

The deal was rubber-stamped at the group's annual meeting in Edinburgh.

RBS, which made a loss of more than £1bn last year, insisted it had to pay staff "fairly" to retain talented and motivated workers.

It emerged last month that Mr Hester was awarded an additional £4.5m potential shares windfall on top of his £2m annual bonus and £1.2m salary for 2010, which was not originally revealed under the Project Merlin agreement with the government to rein in pay.

RBS also admitted it paid 323 core staff - those deemed to be in risk-sensitive roles - £375m last year despite remaining in the red by £1.1bn in 2010.

RBS chairman Sir Philip Hampton told the AGM it had tried to strike a balance between paying to motivate people and showing restraint.

"We need talented and motivated people and we need to be able to pay them fairly," he said.

"It is important to remember we have to motivate all staff and that only a tiny minority were responsible for the problems RBS encountered, all of whom have now left."

Royal Bank of Scotland has said it will pay its investment bankers bonuses of about £950m for 2010 - down from £1.3bn the previous year.

However, only up to £2,000 of any bonus will be cash - with the rest in shares.

RBS chief executive Stephen Hester will receive a £2.04m bonus - all in shares - with his salary frozen at the 2008 level of £1.2m.

Meanwhile Lloyds Banking Group said its outgoing chief executive Eric Daniels would get a £1.45m bonus for 2010.

"In considering the award, the board took into account the current environment and desire for restraint," Lloyds added.

Mr Daniels, who was in charge at Lloyds at the time of the disastrous takeover of Halifax Bank of Scotland, was paid about £1.1m for 2009, having waived his bonus.

'Restraint'

The bonus details came hours after the government confirmed a long-awaited agreement with the largest UK banks on lending and bonuses, called Project Merlin.

However it is believed that RBS, which is 84%-owned by the taxpayer, has reduced its bonus pool in part because its investment banking arm had a worse year in 2010 than in 2009.

"Not all of the fall represents pay restraint imposed by the board of RBS as a result of the Merlin talks," said BBC business editor Robert Peston.

Reports suggest that an estimated 200 of RBS's highest earning investment bankers would earn more than £1m in bonuses each.

Royal Bank of Scotland, which is more than 80% government-owned, is planning to cut another 500 jobs, mostly in the investment banking division in London.

The move comes weeks after the bank said it was cutting 3,500 jobs from its UK technical and back office division.

In a statement RBS said it had "made efficiencies" in response "to changing market conditions".

An estimated 27,000 job losses have been announced since RBS unveiled its restructuring plan early in 2009.

The bank said the latest move would ensure it had "the right people and resources in place to meet our client needs".

It added: "We will do all we can to support our staff, offer redeployment opportunities wherever possible, and keep compulsory redundancies to an absolute minimum."

It is understood that 30,000 jobs will eventually go.

The bank has been told by the European Commission to reduce its number of branches in order to safeguard competition concerns after it was bailed out by the UK government during the financial crisis.

The government still holds an 84% stake in the bank.

RBS reported a loss of £24.1bn for 2008, the largest annual loss in UK corporate history.

However, it has since returned to profit. In the first half of 2010 it made £1.14bn.