This year's average investment banking bonus at RBS will now be £19k

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Investment bankers at RBS have had a bad run. When the bank presented its remuneration report last year, it boasted that it had reduced compensation for its investment bankers by 58%. This followed a 35% cut in their remuneration between 2009 and 2010. And now this year, it seems RBS's investment bankers will have their bonuses cut by another 40%, at least.

The source of the latest pain is, needless to say, the Libor scandal. It was suggested over Christmas that RBS might be reducing bonuses to account for its expected Libor fine. This does indeed seem to be the case. The Financial Times reports this morning that RBS is planning to recoup half of its Libor fine from this year's bonus pool. Given that the fine is expected to total around £300m, the bonus pool could be depleted by £150m. Last year's RBS bonus pool was £390m. This year's could be £240m (or less). RBS employs around 19,200 investment bankers: that amounts to £19k each.

RBS's investment bankers are likely to feel aggrieved. Most had nothing to do with Libor and will find the punishment unjustified. Some may leave. Some of its fixed income staff may feel inclined to join Steve Ashley, the ex-RBS wunderkind who's been hoovering up top RBS bankers now that he's head of fixed income over at Nomura.

Matters are being made worse by the suggestion that John Hourican, the head of RBS's investment bank, will be compelled to resign over the Libor affair. Hourican has only been chief executive of RBS's investment bank since 2008, having previously worked in leverage finance, group finance and operations. The apparent Libor rigging at RBS took place between 2007 and 2010. At the start of this period, Hourican was chief operating officer at the investment bank, but wasn't directly involved in rates trading.

"I'm not currently aware of any allegations against Hourican which suggest that he was negligent in relation to Libor," says Ian Gordon, head of banks research at Evolution Securities. "It seems grossly inappropriate - he's suffering for the sins of his forefathers."

Nor does it seem wholly fair that Hourican will also reportedly have part of his bonus clawed back for the past three years.

RBS bankers may be inclined to leave in disgust. However, another banking analyst cautions that it may not happen. "There's so much politics involved in this that it's hard to know what will happen. These things are floated in the press first to gain feedback and can change in implementation."

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