ROYAL Bank of Scotland’s top brass came under intense pressure from investors over its continuing refusal to set up a shareholder committee at its annual meeting in Edinburgh yesterday, as changes to the state-backed bank’s remuneration policy were carried despite well-publicised criticism.

One outspoken investor, Gavin Palmer, claimed the bank was choosing to “hide behind the lawyers” after it blocked a proposed resolution calling for it to establish a shareholder committee. The bank said legal advice it has received on the matter signalled to do so would be incompatible with company law and against its constitution.

The row came before a resolution asking shareholders to support changes to its pay policy were carried by more than 96 per cent of investors. The changes include a 40 per cent cut in maximum long-term incentive awards but investor groups such as Pensions and Investment Research Consultants and Institutional Shareholder Services argued the moves did not go far enough.

Mr Palmer said Norges Bank had successfully run shareholder committees for 25 years, and dismissed chairman Sir Howard Davies’s argument that differing corporate governance in Scandinavia was a reason why Royal Bank could not adopt the model. “I’m sorry sir but that’s not good enough,” Mr Palmer said. “Stop flannelling about.”

Sir Howard declined a request from Mr Palmer to publish the legal advice the bank had received over the issue. He said the proposals put forward by investor groups such as Sharesoc for a shareholder committee would not be compatible with the UK Government’s forthcoming reforms on corporate governance, stating that it would be “wise” for the bank to wait until ministers publish their proposals further to the green paper. That is now likely to be after the General Election, Sir Howard said.

Mr Palmer, who argued that a shareholder committee would have stopped Royal Bank sliding to the massive losses it has reported in the last eight years, accused the bank of failing to lead on the issue. “That’s reasonable for sheep to follow. We expect Royal Bank to lead,” he said.

Mr Palmer added: “How about a little bit of courage and actually leading from the front and being proactive, instead of hiding behind government [proposals]?”

Under new measures aimed at increasing shareholder engagement, the bank said it will be running two shareholder events, on July 31 in London and October 30 in London.

Mr Palmer’s comments came at the start of a stormy annual meeting for the bank, with Sir Howard fielding questions from angry shareholders on issues such as the bank’s controversial Global Restructuring Group. One shareholder called on the bank to reconsider its branch closure programme.

The bank meanwhile warned it will be hit by “further significant” one-off charges this year relating to ongoing litigation and conduct charges. The lender said the “one-offs”, which relate to a potentially massive fine in the US over its role in the sale of residential mortgage-backed securities before the financial crash and restructuring costs, will lead it to make a loss this year. It provided no further update on the investigation by the US Department of Justice into the sale of securities in 2007, beyond noting it hopes to resolve the issue this year.

But the bank declared again its confidence that it would make a profit in 2018, which would be its first since its £45 billion bailout by the UK Government at the height of the financial crisis of 2008 and 2009.

Royal Bank recently unveiled a reported profit of £259 million for the first quarter of the year, its first quarterly profit since the latter part of 2015.

Sir Howard said: “Reporting a bottom line profit for 2018 would be a huge milestone for the bank, after what will, by then, have been ten extremely tough years of losses.”

Under changes to its directors’ remuneration policy, which the bank said aims to curb “excessive risk-taking”, the shareholding requirements for executive directors will rise from 250 per cent to 400 per cent of salary for the chief executive, and from 125 per cent to 250 per cent for the chief financial officer.

On the legal action from shareholders over the bank’s rights issue of 2008, the bank said it has now reached settlement with shareholders representing around 87 per cent of the value of the claim. Sir Howard declared the bank’s intent to “defend ourselves vigorously” when the trial starts on May 22, if settlement with the remaining claimants is not reached before then. The bank was recently criticised for running up legal costs of more than £100m defending the claims.

Shares in Royal Bank closed down 2.3p at 260.8p.