Britain's biggest banks are involved in behind-the-scenes talks over a joint plan to cut bonus payouts and boost lending to small businesses, it was reported today.
Senior executives from Barclays, HSBC, Standard Chartered and Royal Bank of Scotland are understood to have held discussions last week, The Times said.
The discussions come as pressure mounts from politicians and business leaders to lower the pooled bonus pot ahead of January's bonus round. Business Secretary Vince Cable recently called for "restraint" from banks when determining remuneration.
John Varley, outgoing chief executive of Barclays, is believed to be a key player in the talks, which are still ongoing. The industry trade body, the British Bankers' Association, is not involved and declined to comment.
The banks are looking at reducing the overall level of bonus payments, it was claimed, but are resisting the idea of an absolute cap on individual bonuses, as this would leave them at a disadvantage to their overseas rivals.
Bankers' pay packets are continuing to recover to pre-credit crunch levels. A study by the Centre for Economics and Business Research (CEBR) - which took into account all City workers including fund managers and staff working with equities and bonds - forecast the total bonus pot to hit £7 billion this year alone.
It is understood the banks want to release a joint statement before Christmas after they have agreed a position.
The banks are also believed to be looking at increasing lending to small businesses, which could involve a pledge to commit a fixed total amount to small business lending next year.
Earlier in the year, bosses of UK banks, co-ordinated by the BBA, unveiled plans for a £1.5 billion growth fund for small businesses. It is not clear if the discussions are related to this project.
US and European investment banks operating in London, including Goldman Sachs, Morgan Stanley, Deutsche Bank, Citigroup and UBS, are not involved with the talks.
The BBA claims Britain already has the toughest bonus regime in the world. In a statement last week it said: "Outside the UK, the concern on bonuses is either much more limited or hardly exists at all."
Under EU rules, senior managers in financial firms operating across Europe must defer up to 60% of their bonuses for three to five years. Half of all bonuses need to be paid in shares, rather than cash.
The UK has adopted the EU rules, but has gone further by permanently retaining last year's bonus tax.Reuse content