RBS 2012 Annual Report Download - page 382

3 Operating expenses continued
Variable compensation awards continued
LIBOR
On 6 February 2013, the Group made an announcement in relation to the
investigations conducted in relation to attempts to manipulate LIBOR and
the settlements reached with the FSA and US authorities. The
investigations uncovered wrongdoing on the part of 21 employees,
predominantly in relation to the setting of the bank’s Yen and Swiss Franc
LIBOR submissions in the period October 2006 to November 2010.
The Board has acknowledged that there were serious shortcomings in
our risk and control systems and also in the integrity of a small group of
our employees, and has taken action to ensure full and proper
accountability:
x All 21 wrongdoers referred to in the regulatory findings have left the
organisation or been subject to disciplinary action.
x Individuals found culpable have left the bank with no 2012 variable
compensation awards and full clawback of any outstanding past
variable compensation applied.
x Supervisors with accountability for the business but no knowledge or
involvement in the wrongdoing have received zero variable
compensation awards for 2012 and a range of clawback from prior
years depending on specific findings.
x Reduction of variable compensation awards and long-term incentive
awards and prior year clawback has been made across RBS and
particularly in the Markets division to account for the reputational
damage of these events and the risk of additional outstanding legal
and regulatory action.
The actions we have taken reinforce the messages we are sending on
the how seriously the Board takes integrity and risk and control issues.
The impact of such issues on our shareholders and wider stakeholders
extends beyond those directly involved in LIBOR, so it is appropriate that
remuneration actions have a Group-wide impact.
The cumulative impact of the Board’s actions is a deduction from
employee incentive pay of over £300 million, with the Markets division
bearing the greatest cost. A breakdown of how this figure has been
reached is set out below:
£m
Variable compensation award reduction 110
Long term incentive award reduction 30
Clawback of prior year awards (including LTIP) 112
Committed future reduction 2013/2014 50
Total 302
4 Pensions
The Group sponsors a number of pension schemes in the UK and
overseas, predominantly defined benefit schemes, whose assets are
independent of the Group’s finances. The principal defined benefit
scheme is The Royal Bank of Scotland Group Pension Fund (the “Main
scheme”) which accounts for 85% (2011 - 85%; 2010 - 84%) of the
Group’s retirement benefit obligations.
The Group’s defined benefit schemes generally provide a pension of one-
sixtieth of final pensionable salary for each year of service prior to
retirement up to a maximum of 40 years. Employees do not make
contributions for basic pensions but may make voluntary contributions to
secure additional benefits on a money-purchase basis. Since October
2006, the Main scheme has been closed to new entrants who have
instead been offered membership of The Royal Bank of Scotland
Retirement Savings Plan, a defined contribution pension scheme.
Since 2009, pensionable salary increases in the Main scheme and
certain other UK and Irish schemes have been limited to 2% per annum
or CPI inflation if lower.
With effect from 1 October 2012, employees in the Main scheme and
certain other UK schemes were offered a choice between accepting an
increase in the charge made for membership of 5% of salary, or a
retirement age of 65 for future benefits.
The Group also provides post-retirement benefits other than pensions,
principally through subscriptions to private healthcare schemes in the UK
and the US and unfunded post-retirement benefit plans. Provision for the
costs of these benefits is charged to the income statement over the
average remaining future service lives of eligible employees. The
amounts are not material.
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Notes on the consolidated accounts continued