Big bonuses here to stay, warns Barclays chief Bob Diamond
Tuesday 11 January 2011
Barclays chief executive Bob Diamond today pledged to show restraint over banker pay, but told MPs big bonuses were here to stay if the sector was to succeed.
The multi-millionaire banker, who took on the top job at Barclays on January 1, said the time for "remorse and apology" needed to be over to allow banks to support Britain's recovery.
In a hostile grilling by the cross-party Treasury Select Committee, Mr Diamond committed to being responsible in setting bonuses and would not pay more than was necessary.
However, he refused to be drawn on the bank's plans for this year's bonus round or his own windfall as he said the pot had not yet been set.
Mr Diamond is expected to be offered around £8 million for 2010 performance, having waived his bonus for the last two years.
John Mann, Labour MP for Bassetlaw, asked if he would forgo his bonus again this year.
Mr Diamond batted away the question, saying: "I've not been awarded a bonus yet. I'll make that decision with my family, as I did last year."
The bank's new boss was being quizzed by the Commons committee during its hearing into competition and choice in British banking.
Britain's banks are in the process of totting up their bonus pots before full-year results are published, with bank pay also in the spotlight amid speculation the Government has caved into the City on the issue of bonuses.
Mr Diamond surprised MPs when he said that the Prime Minister and Chancellor had not asked him face-to-face to limit his bonus.
The 59-year-old - once described as the "unacceptable face of banking" by Lord Mandelson - said he had also not been pressed by the former government when deciding to forgo his handout in 2009 and 2010.
However, he said the debate needed to move on.
"Frankly, the biggest issue is how do we put some of the blame game behind us?"
He added: "There was a period of remorse and apology for banks - that period needs to be over. We need banks to be able to take risk, working with the private sector in the UK."
As the debate became increasingly heated, David Ruffley, Tory MP for Bury St Edmunds, questioned Mr Diamond over a Bank of England assertion that because Barclays is too big to fail it is more credit-worthy and can therefore borrow more cheaply.
Mr Ruffley demanded: "Are you grateful to the British taxpayer for subsidising you in this way?"
Mr Diamond said he was "very grateful" to governments around the world for the action they took.
Mr Ruffley then stepped up pressure on Mr Diamond to put a figure on how much Barclays would lend to small and medium-sized enterprises this year, but Mr Diamond said the figure was not yet decided.
Despite a bruising exchange over bonuses, the bank chief stuck to his guns that while he would show restraint on pay, it was a necessary evil in ensuring UK banks prosper.
His message was that Barclays was a bank to be proud of and the group wanted to help drive UK economic growth. It would retain its headquarters in London, he added.
"The system needs to be safer and sounder in terms of how compensation works, but it's in the interests of everyone in the country that we shift growth to the private sector.
"I don't agree that I can isolate bonuses and assume that would have no consequences on the rest of the business."
Discussing risk-taking in the bank sector, Mr Diamond said banks should be "allowed to fail" and it was not acceptable to take bail-outs from the taxpayer.
Mr Diamond said Barclays was not "too big to fail" and was working on plans and procedures for recovery if it was to get into trouble.
The issue of competition in the banking sector was sidelined at the hearing as bonuses took centre stage.
However, Mr Diamond was asked about his stance on separating retail, or high street banking, from riskier investment banking - sometimes dubbed casino banking.
"The financial model is stronger as a result of the integrated business model," Mr Diamond replied. "It gives us a greater capacity for lending."
Mr Diamond was seen as a controversial choice to succeed former Barclays chief executive John Varley, having amassed one of the biggest banking fortunes in the world during his time in charge of investment banking arm Barclays Capital.
It is thought this year's bonus will be reined in to reflect his new role, but he is still entitled to a potential package worth £11.4 million, including a basic salary of £1.35 million.
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