Barclays to slash pay and bonuses ratio

Click to follow

Banking giant Barclays is to cut the proportion of revenues paid out for pay and bonuses to its lowest level for 10 years, it was reported today.

The group is said to be preparing to slash its so-called compensation ratio for 2009 to 38 per cent, down from 44 per cent the previous year, ahead of next week's annual results announcement, according to Sky News.

The move comes as banks seek to cool anger over City pay plans amid concerns of a return to excessive remuneration so soon after the financial crisis and taxpayer-backed bail outs.

The start of the UK bank reporting season is likely to be dominated by bonus plans.

Barclays is expected to report profits of around £10.3 billion for 2009 - up 70 per cent on the year before, powered ahead by its Barclays Capital investment banking arm.

It has been a clear UK winner from the financial crisis after avoiding state support.

The reported plan to drop the compensation ratio to 38 per cent is likely to still see multi-million pound handouts for its top bankers.

And it comes after US groups have taken tough action to cut the ratio - by as much as half for JP Morgan, which reduced the proportion of revenues paid out for compensation from 62 per cent in 2008 to 33 per cent.

Barclays declined to comment, but confirmed previous pledges to meet the international G20 rules on pay reforms, which recommend clawback clauses and deferral over a number of years.

Part-nationalised Royal Bank of Scotland will also come under the bonus spotlight when it reports results later this month, although it is thought the Government body charged with overseeing bank stakes wants to see Barclays' remuneration plans before it considers RBS's own proposals.

It is reported that RBS will pay around £1.3 billion in bonuses after chief executive Stephen Hester promised that remuneration will be the "minimum we can get away with".

Barclays' bonus plans will be of particular interest, given its recent stellar performance.

The bank has benefited from a full year of trading from the US business of bankrupt Lehman Brothers, bought in 2008, as well as Government support measures which have boosted investment banking revenues across the board.

Barclays chief executive John Varley told MPs on the Treasury Select Committee this week that banks had lost the trust of the public. In future, he added, "we will be judged on two things - one is how we lend, and the other is how we pay".

The Government has already slapped a one-off 50 per cent tax on 2009 City bonuses above £25,000 in an attempt to curb pay in the sector.

A number of foreign banks with UK operations have already said they will cap UK staff bonuses as a result, including Credit Suisse, which is reducing its 2009 global bonus pool by 5 per cent and its UK bonus pool by an additional 30 per cent.

Goldman Sachs is imposing a salary and bonus cap of £1 million on the company's partners in London.

It is thought that Barclays is seeking instead to share the pain across the group rather than single out its UK team, by paying the tax from both its general bonus pool and overall bank revenues.

In future, banks will have to provide greater disclosure of big pay and bonus packages under reforms proposed by Sir David Walker.

The City grandee has recommended that banks disclose pay in bands between £1 million to £2.5 million, £2.5 million to £5 million and over £5 million - although individuals will be able to keep their anonymity.