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Has the government done a backdoor deal with RBS?

As quickly as the Royal Bank of Scotland bonus row emerged it would appear it has died a death this afternoon with news that Royal Bank of Scotland directors have "given in" and bowed to pressure from the UK government to slash bonuses for 2009. However, there are rumours of backdoor deals with the management of Royal Bank of Scotland which would indicate a return to large salaries and large bonuses from 2010 onwards. So what exactly is going on?

At this point in time, for the government and the banking industry, it is all a matter of public image and what the taxpayer perceives to be the real story in the press. There is no doubt that we will see a short-term return to large salaries and large bonuses in order to retain banking staff in what is effectively a state controlled business. There is no way the government could afford for the directors of Royal Bank of Scotland to leave en masse which has led to rumours of backdoor deals and secret agreements.

Whether this particular announcement today will be used as a basis for future banking bonus and salary arrangements, now that the regulator has taken a more hands-on approach, remains to be seen.

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