Lloyds TSB staff WILL get bonuses - even though bank had £5.5bn Government bail-out



Bonus message: Eric Daniels, chief executive of Lloyds has told employees that the Government bail-out would not stop them getting bonuses

The chief executive of Lloyds TSB, one of the banks being bailed out by a £37bn Government rescue package, promised staff they will receive bonuses this year.

In an extraordinary and provocative message, Eric Daniels told employees that the historic Government intervention would not restrict the lucrative payouts.

He claimed the bank's staff have done a 'terrific job this year' and 'there is no reason why we shouldn't' get bonuses.

The recorded message to his employees is bound to infuriate millions across Britain who have watched the banking industry crumble under the weight of bad debts during the current financial turmoil.

When Gordon Brown made the decision to invest billions of taxpayers money to prop up some of Britain's major banks, he promised to end the culture of 'rewards for failure'.

He pledged that the directors at the banks which were taking part in the bail-out scheme would not receive cash bonuses this year.

However, although Lloyds TSB will receive £5.5bn of taxpayers funds, Mr Daniels said that the move placed 'very, very few restrictions' on the bank's behaviour.

He said: 'If you think about it, the first restriction was not to pay bonuses. Well Lloyds TSB is in fact going to pay bonuses.'

In his message, he said that the Government had agreed Lloyds TSB was in a 'different' position to HBOS and Royal Bank of Scotland, the two other banks taking taxpayers' funds in return for shares.

The bank is understood to be planning to ask its executives to take their bonuses in 2008 and 2009 in shares rather than cash.

Until Lloyds TSB announced its plans to takeover the stricken HBOS last month, it had weathered the financial storm comparatively well.

But as a result of the move, it could find that the taxpayer ends up owning more than 40 per cent of the new bank.

Mr Daniels' insisted that the bank's leading policy would not be dictated by the Government.

'We do not have any such restrictions,' he said.



'What we have given the Government is an assurance that we will make our products available in the SME [small and medium business] markets and mortgages so we will have good availability and we will market just as hard as we did in 2007.

'I have no issue in agreeing that,' he told staff in a message passed to The Guardian newspaper.

Tough talk: Gordon Brown has promised to end the culture of 'rewards for failure' but Lloyds appear to be carrying on regardless

He also played down the significance of the two new board members who will be appointed once the controversial takeover of HBOS is clinched.

He added: 'Those board members are not there to protect the Government. They are their to serve our customers.'

Mr Daniels conceded that the only 'restriction' would be the inability to pay dividends to existing share holders until the bank has paid off preference shares that are also part of the deal.

This stipulation is believed to have been made by the EU in return for the bail-out using taxpayers' money.

The employees addressed by Mr Daniels are not necessarily the highest paid at the bank and could be working in branches, earning around £15,000 a year and relying on bonuses to bolster their income.

The chief executive, however, made no such assurances to staff at HBOS, whose chief executive and chairman will both leave when the takeover is completed early next year.



The taxpayer is likely to end up with a 43 per cent stake in the combined Lloyds TSB-HBOS, although the price at which the HBOS shares are currently trading on the stock market indicates some concern about whether the deal will ever be completed.



