Chancellor of the exchequer, George Osborne has approved an £8.3m pay package for Antonio Horta-Osorio, who is set to be the new chief excecutive of Lloyds Banking Group, said the Treasury on Wednesday.
Horta-Osorio, who currently heads Santander's UK operations will take over from Eric Daniels at Llyods on 1 March next year.
Sources in the treasury have said that while Osborne acknowledged that the large salary could be a tenacious issue, the bonus was partially dependant on lending to small businesses.
Owing to the wage freeze on public sector employees, Horta-Osório will receive a basic salary of £1.035m in addition to a discretionary annual bonus of £2.33m, worth 225 per cent of his salary.
Horta-Osório could receive £4.347 million through a long-term share-based incentive scheme where his rewards are tied to company stock value.
Ana Patricia Botín, the daughter of the Santander chairman Emilio Botín, will replace Horta-Osório at his current position.
"He should be setting an example with this kind of public sector pay," said Shadow Chancellor Alan Johnson, adding that it was wrong of Osborne to approve such a large pay package to Horta-Osório.