THE UK's Royal Bank of Scotland (RBS) insists it would press ahead with its controversial bonus plans, despite rumours a mounting political backlash would force it to back down. Directors, led by the chief executive, Stephen Hester, insist future profits at the largely state-owned bank would be jeopardised if a clampdown on bonus payments led to a mass exodus of top staff.

Sources close to the bank said the directors expected a long battle with government ministers and UKFI, the state body set up to oversee government stakes in banks, amid public hostility to wealthy bankers and excessive profits in the City of London.

A confrontation between the banks and the government looks certain in the run-up to Christmas as television and radio phone-in shows report almost unanimous popular opposition to RBS's bonus plans, with many people urging its directors to act on their threat to resign.

Confirmation that other banks are preparing to pay massive bonuses is expected to fuel public anger, and several City of London firms are understood to have taken extra security precautions to prevent protesters disrupting their business.

Lloyds Banking Group confirmed it has put in place a one-off share payment potentially worth up to 200 per cent of salary to a small number of senior managers. The bank negotiated the deal with shareholders as it geared up to embark on its merger with HBOS bank at the beginning of this year.

A spokesman for Lloyds said its scheme was “very closely aligned” to the success of its merger.

The British government went further with Royal Bank of Scotland and Lloyds Banking Group by demanding that all bonuses for those earning more than £39,000 a year be paid entirely in stock. However, the government minister Paul (Lord) Myners said banks were expected to pay at least 5,000 staff bonuses of more than £1m each.

— The Guardian, London