Newspaper article The Journal (Newcastle, England)

ECONOMIC CRISIS: MP Questions the Rock's 'Perverse' Bonus Scheme

Newspaper article The Journal (Newcastle, England)

ECONOMIC CRISIS: MP Questions the Rock's 'Perverse' Bonus Scheme

Article excerpt

NORTHERN Rock has been accused of introducing a "perverse" bonus structure which would see staff benefit from strict mortgage repayments and home repossessions.

Staff are being encouraged to top up their salaries by helping repay the bank's pounds 26bn loan in full by 2010, a schedule critics say will only be met if the Rock treats customers "unfairly".

The bank has strongly denied a link between repossession rate and staff bonuses Up to 4,000 Rock workers stand to receive 10% of their salary when a quarter of the loan is repaid this year, and 10% if three-quarters is paid off next year, a spokeswoman confirmed.

When the loan has cleared, they could get a further 15% reward and another 25% of their salaries when Northern Rock is eventually returned to the private sector.

The news comes as the Government continues with a crack down on bank bosses bonuses.

Last night Treasury Select Committee member Jim Cousins said the bonus scheme was "perverse".

The Newcastle Central MP said: "There will be a great deal of parliamentary concern about a bonus scheme that appears to incentivise treating customers in harsh way and perhaps going as far as repossessions a family's home. It appears to me perverse that these bonuses will be paid at a time when the Government is telling banks to lend and to free up the economy."

Mr Cousins has questioned the need to repay the Government loan by 2010, warning the rapid repayment risked causing more damage to the bank and its mortgage book.

"There is a real conflict between treating your customers fairly and meeting your obligation on the loan," he added.

Under the plan, chief executive Gary Hoffman could get an extra pounds 420,000 on top of his pounds 700,000 salary.

The bank has played down the link between repossessions and loan repayments, stressing the "primary" method of repayment was through the sale of mortgage assets. …

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