The state-backed Royal Bank of Scotland (RBS) is finalising plans to pay about £340m in bonuses to employees for last year, even as it prepares to announce one of its biggest annual losses since its 2008 bailout.
Sky News has learnt that RBS, which is just over 70%-owned by the Government, has disclosed proposals for the bonus pot during recent discussions with UK Financial Investments (UKFI), which manages the taxpayer's stake in the bank.
The number has yet to be formally approved by ministers - with Philip Hammond, the Chancellor, expected to be consulted - but if given the go-ahead, it would be the ninth year in a row that bonuses at the bank have fallen.
It would also mark the first time since the financial crisis that Lloyds Banking Group will have paid out a bigger sum in bonuses than RBS.
Insiders said this weekend that Lloyds was expected to award approximately £390m in variable pay to employees, reflecting an improved financial performance during 2016.
In total, that would mean that the two big lenders part-owned by taxpayers will pay more than £700m in bonuses for last year - a controversial sum at a time when Theresa May, the Prime Minister, has signalled a desire to help millions of "just about managing" families across Britain.
Nevertheless, with Lloyds now almost wholly owned by private sector investors once again, and RBS's bonus pot continuing to decline, people close to UKFI suggest that any fallout from the bonus awards will be manageable.
RBS has slashed bonus payouts since its 2008 rescue by taxpayers, when it forked out £1.4bn in a single year in discretionary awards.
Last year, RBS awarded just over £370m in bonuses, down from more than £400m the year before.
With a ninth consecutive annual loss about to be announced, the declining pay pool reflects RBS's retrenchment from higher-paying investment banking activities as well as a regulatory clampdown on the way bankers are remunerated.
Labour politicians are unlikely to pass up the opportunity, though, to attack the Government's management of the RBS shareholding, particularly as it braces for a settlement with US authorities over the mis-selling of mortgage-backed securities prior to the 2008 financial crash.
Last month, RBS said it would take an additional £3.1bn charge for settling various investigations into its conduct on those matters, taking the total it has set aside to £6.7bn.
It is also facing pressure to resolve the fate of a network of more than 300 branches which were to have been rebranded under the name Williams & Glyn but which have now attracted complicated takeover interest from Santander UK and CYBG.
While the loss that RBS reports on February 24 will be small by comparison with the £24bn loss it announced for 2008, the figure will nevertheless be substantial: by one measure, it made a loss of £2.5bn in the first nine months of 2016, and its full-year deficit could be more than £5bn, according to analysts.
RBS has been pushing to gain clarity over the size of a DoJ penalty in recent months, partly in order to enable Ross McEwan, chief executive, to focus on other areas of transformation during 2017.
Allocating the charge to its 2016 results will allow it to create a clearer picture of progress in its financial performance during the next 12 months.
Mr McEwan has repeatedly sought to defuse the row over pay at RBS by scrapping annual bonuses for senior executives and waiving a number of payments to him since he replaced Stephen Hester in 2013.
Sources said that UKFI was likely to insist again on a £2000 limit being imposed on cash bonuses for staff at RBS and Lloyds.
RBS declined to comment on Saturday, while UKFI could not be reached for comment.
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