THE board of Lloyds Banking Group, which is 43%-owned by the government, is prepared to inflame the growing row over City bonuses.

It is ready to accept share-based rewards for the last financial year, a period which has seen its share price fall by 75% and just weeks after the bank received a £5.5 billion cash injection.

Eric Daniels, the Lloyds chief executive, believes that he and his colleagues met the group’s financial criteria to receive a bonus, although he has conceded they should be paid in shares rather than cash.

Daniels maintains his bank has avoided the disaster zones in sub-prime and leveraged loans that have afflicted Barclays, Royal Bank of Scotland and HBOS, a bank that Lloyds has just taken over.

The size of the Lloyds bonuses will be determined by Wolfgang Berndt, chairman of the bank’s remuneration committee. Daniels is entitled to a maximum bonus of 225% of his basic salary of £960,000. His other 11 directors are entitled to 200% of their salaries.

No director will receive the maximum payout, but the fact they are prepared to take them when other banks – including Barclays – have said they will not, will anger investors and the government.

A Lloyds spokesman said: “Any decision about bonuses is a matter for the company’s independent remuneration committee. These are only paid if stretching performance targets are met.”

Investors have seen the share price collapse in the past year and are concerned about the scale of losses and write-downs that will result from the HBOS takeover. The government has also expressed disquiet at executives taking bonuses.

One investor who contacted The Sunday Times said the directors could face a row at the annual meeting, where bonuses will be put to a vote.

Tomorrow Barclays will confirm that it is paying staff bonuses but they will be at least half what they were the previous year. John Varley, Barclays’ chief executive, and his board colleagues have already said they will not take them.

UBS will also pay out bonuses to staff but they will be at least 80% less than in the previous year. However, it may introduce deferred cash payments if bankers hit certain targets.

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