BARCLAYS YESTERDAY announced a top-level review of its bonus structure amid a growing political clamour in Britain over rewards paid to bankers in the midst of the credit crunch.
British prime minister Gordon Brown said yesterday he was “angry” that Royal Bank of Scotland (RBS) – a part-nationalised bank – was preparing to pay £1 billion in bonuses. Other ministers urged bankers to forgo their rewards.
The start of the bank-bonus season has provoked a wave of anger towards bankers in Britain. Today the former bosses of RBS and HBOS will be questioned by MPs on how they led their institutions to the edge of collapse.
Mr Brown has ordered a review of bonuses but privately ministers admit that some payouts are needed to retain staff at the two part-nationalised banks, RBS and Lloyds Banking Group – which now includes HBOS.
Against the growing political furore, Barclays yesterday revealed it had halved payouts last year and launched a board level review of its compensation policies.
John Varley, chief executive, acknowledged public anger at banks’ decision to pay bonuses in spite of the credit crunch and the support from taxpayers.
As Barclays reported pre-tax profits of £6.1 billion, down 14 per cent on the previous year, Mr Varley said bonuses had dropped by 48 per cent last year, with payouts at Barclays Capital and Barclays Global Investors, its investment banking and fund management arms, falling even further.
Bob Diamond, Barclays’ president, said: “There was a dramatic reduction in incentive compensation in Barclays Capital.”
As the UK government announced a review of corporate governance of banks, Mr Varley said: “You will see...that pay has not been reflective of risk. We are conducting our own reviews to show the world that our approach is fit for the future.”
The government rhetoric on bank pay is likely to increase the pressure on Barclays to make concessions if it decides to make use of the government’s proposed insurance scheme.
Mr Varley said the bank had not yet decided whether to use it. "We have to make a decision in due course whether it would make economic sense for us to participate in the asset protection scheme." – ( Financial Timesservice)
