The Royal Bank of Scotland (RBS) has unveiled a new remuneration scheme for senior executives which will measure performance over a range of "substantially toughened" criteria.
The policy could reward executives with shares worth up to 400 per cent of their annual pay.
The bank, which is 84 per cent taxpayer-owned, wants a more balanced pay structure and has outlined a long-term incentive plan in its annual report.
Under the new scheme, Stephen Hester, RBS' chief executive, could earn nearly £5m in bonuses each year. This represents a 400 per cent increase on his basic salary of £1.2m. Hester had waived his last year's bonus after public backlash over excessive bankers' pay.
The proposed bonus scheme means half the award will be linked to the bank's economic profit, which factors in its cost of capital, and the rest on total shareholder return. This is more sophisticated than the two previous pay schemes which paid out shares worth a maximum of 300 per cent and 150 per cent of salary, respectively.
The new bonus scheme will be put to a shareholder vote at the RBS' annual meeting where it is almost certain to be approved.
