Lloyds Banking Group is to hand boss Antonio Horta-Osorio a £900,000 shares allowance this year on top of his salary and potential bonus as it looks to sidestep new European rules capping payouts.
The taxpayer-backed group's annual report confirms it plans to introduce new "fixed annual payments" for staff which will put Horta-Osorio in line for a potential total salary and bonus package worth £4.9 million for 2014.
Lloyds said it will ask shareholders to approve plans to offer its executive team and a "small number" of other employees the maximum allowable bonus worth 200% of salary for this year.
Its annual report showed that 27 employees were handed £1 million or more in pay and bonuses last year, up from 25 in 2012.
Lloyds said its remuneration committee "strongly believes in pay for performance, in providing a competitive package that allows us to attract and retain the key talent necessary to deliver the strategy set by the board, and in ensuring that fixed costs are properly managed".
But its plans to defy the bonus cap are controversial, given its status as a part-nationalised bank and in light of its mammoth bill for the payment protection insurance (PPI) scandal and recent record £28 million fine for handing sales staff "champagne bonuses" that encouraged mis-selling.
It is thought that Lloyds is clawing back the remaining bonus handed out to former chief executive Eric Daniels for 2010 as a result of its PPI compensation bill, which has now hit nearly £10 billion after another £3.1 billion was set aside for 2013 alone.
The bank has already recouped around 80% of the £1.45 million 2010 deferred bonus that was earmarked for Mr Daniels and is now expected to claw back the remaining 20%.
Helen Weir - the former Lloyds head of retail banking at Lloyds - is also among those said to be in line for further clawback after she was paid £875,000 in deferred shares for 2010.
Lloyds declined to comment on the clawback plans, saying only in the annual report that its remuneration committee had recommended the board "should exercise its discretion to adjust the value of certain 2010 and 2011 bonus awards, on a basis equivalent to that applied in the previous year".
The Bank of England said yesterday it was consulting on plans to go even further with bonus clawback, with aims to give firms the power to recoup bonuses that had already been paid to staff in time for the 2014/15 bonus round.
Lloyds said the new fixed annual allowances will be paid solely in shares and will be released over a period of five years.
It comes as rival Barclays is said to be planning a similar move to sidestep the bonus cap rules, with reports he will be handed up to £1 million in shares to compensate for a lower maximum variable payout.
HSBC has already said it will offer boss Stuart Gulliver £1.7 million in fixed pay allowance to be awarded in shares on a quarterly basis, on top of his £1.25 million salary.
Details of Horta-Osorio's bumper 2014 payout comes just weeks after he refused to forgo a £1.7 million shares bonus and said the bank was handing out £395 million to staff after returning to bottom line profit for the first time in three years.
See also:
Reasons Why The Banks Aren't Yet In Order
Horta-Osorio's counterparts at Barclays and Royal Bank of Scotland have already waived their entitlements to bonuses for 2013.
But he defended the decision, saying Lloyds was now a "normal bank" after posting statutory profits of £415 million against losses of £606 million in 2012 - its first bottom line profit since 2010.
Today's annual report showed his package for 2013 reached £4.6 million, including his £1.1 million base salary, the £1.7 million deferred shares bonus, a £1.1 million shares long-term incentive payout and more than £680,000 in pensions benefits.
While he is expected to earn around £4.9 million in 2014, his potential package could reach £7.8 million, if the maximum long-term incentive payout of 300% of salary is awarded.
Barclays, whose annual report is also imminent, has sought to defend its decision to increase bonuses by 10% to £2.4 billion despite posting a 32% drop in underlying annual profits to £5.2 billion.
Chief executive Antony Jenkins told The Daily Telegraph he was attempting to avoid a "death spiral" after an increase in the number of staff leaving.
The bank is expected to reveal it paid between 475 and 500 staff more than £1 million last year - up from 428 in 2012.
Lloyds also became the latest group to warn over the impact of a "yes" vote for Scottish independence.
In its annual report, it said: "The impact of a 'yes' vote in favour of Scottish independence is uncertain.
"The outcome could have a material impact on compliance costs, the tax position, and cost of funding for the group."
It will monitor and assess the situation.
A Treasury spokesman said: "Lloyds have now joined Royal Bank of Scotland and Standard Life in reasonably and fairly pointing out the risks and costs that arise from independence.
"This uncertainty is being made worse by the Scottish Government's failure to set out a plan for what currency it would use in the event of independence.
"These interventions from business show that the strength and stability of the United Kingdom is the essential underpinning of Scotland's successful financial services sector over several centuries."