The time for bankers to show any remorse for the failings that dragged Britain into the worst recession since the Wall Street crash is "over", the new boss of Barclays said yesterday, as the fury over the City's forthcoming £7bn bonus binge grows.
An unrepentant Bob Diamond, who will collect a pay package worth about £8.5m this year, faced down his critics at the Treasury Select Committee. Asked if David Cameron or George Osborne had asked him during their meetings to show restraint over his own bonus, Mr Diamond said: "No."
He also told MPs that he "resented" some of their lines of questioning.
Mr Diamond batted away the possibility of waiving his bonus, saying: "I haven't been offered a bonus yet. That decision is out of my hands. I would discuss [waiving] it with my family."
Responding to suggestions that Barclays Capital, the separate investment bank he used to run, indulged in "casino capitalism" and "black jack", Mr Diamond responded angrily.
"I resent the fact you refer to it as black jack. I think it is wrong. I think it is unfair. I think it is a poor choice of words. We have some fantastically strong financial institutions in this country and I think they deserve better. It is not appropriate to talk about casino banking in Barclays Capital."
Mr Diamond's broader attempts to defend the City did not dampen the heat over bonuses. Committee member John Mann accused Barclays of operating in a "moral haze", while its chairman Andrew Tyrie, a Conservative, suggested that banks might be less inclined to take risky decisions if their chief executives were faced with unlimited liability for losses they caused, as used to be the case in the City of London's old partnership stockbrokers.
The three hours of testy exchanges follow the weekend climbdown of the Coalition on what was supposed to have been a crackdown on bank bonuses. Both Mr Osborne and Mr Cameron have made headlines with their harsh words for the banks in the past, as have their coalition partners Nick Clegg, the Deputy Prime Minister, and Vince Cable, the Business Secretary.
But the Government has been left trying to dampen the public outrage over a new round of high bonuses. The Treasury is trying to obtain new commitments from the banks to lend more to small businesses – although critics point out that the banks are already missing such targets for lending.
When pressed on improving lending to small businesses, Mr Diamond refused to set targets and would not pledge to resign if Barclays ended up not lending more to small businesses.
Afterwards, Mr Osborne made an emergency Commons statement. The Chancellor said that he was "now in discussions with the banks to see if we can reach a new settlement, where the banks pay smaller bonuses than they would otherwise have done". Mr Osborne added that he wanted banks to be "more transparent about those [bonuses] they do pay; make a greater contribution to local communities and the regional economy; treat customers fairly; and above all lend materially and verifiably more than they were planning to the businesses of Britain – especially the small businesses – so that they can grow and create jobs this year."
He insisted that if a deal was not done "nothing remains off the table". Treasury sources said later that could mean a higher levy on banks' balance sheets, already due to raise almost £10bn during this parliament. However, the most likely outcome is the announcement of a voluntary agreement with the banks in the next few weeks.
Asked what Mr Diamond should earn, Mr Osborne said that it should be less than last year.
To head off criticism of his own package – likely to come to around £8.5m this year – Mr Diamond sought to stress his humble origin as the son of two teachers in New England who "learned, perhaps too early, that if I wanted a new shirt or a new football I had to pay for it myself". Despite his strong words, Mr Diamond insisted at one point that he "understands" the mounting public anger at the prospect of champagne in the City when the rest of the country is facing a climate of job losses and austerity as the Government battles to bring the UK's budget deficit under control.
"I understand there is debate in the area of bonuses. I'm committed as CEO to being responsible, on showing restraint," Mr Diamond said. But he defended the payment of bonuses, saying he couldn't "isolate" them at Barclays Capital, which he said had to compete with foreign giants such as "Deutsche Bank, Goldman Sachs and JP Morgan". "That's not in my gift," he said, adding: "We haven't made any decisions on bonuses for this year. The board will meet in the next few weeks. Our shareholders are certainly closely involved. Competitive pay for performance is not pay for failure."
Mr Diamond said he was committed to increase lending to businesses but they had to be "credit-worthy".
He also gave a clear commitment that Barclays plans to remain in London, contrasting the thinly veiled threats to quit made by rival HSBC and Standard Chartered if politicians fail to take some of the heat out of recent rhetoric. Some earlier statements Mr Diamond has made about Barclays' location could be seen as equivocal, such as when he stressed investment banking is "mobile".
"We took our first deposits in the City of London in 1690. We have 320 years of history in London. We have no intention of changing that... We respect the process. Our starting position is clear. We will be here in the UK and this is the place we want to succeed."
Mr Diamond described the UK's advantages: "Nowhere in the world has benefited from or been more supportive of foreign trade. It is good for business, good for raising capital and good for attracting talent. There are some issues. We are going to have a reduction in employment; we have to hand the mantle [for economic growth] to the private sector and to banks."
Asked if Barclays was "too big to fail", Mr Diamond said: "No, I don't think so. No bank should ever be a burden on the taxpayer. We have to make the system safer and more sound. It is not OK for taxpayers to bail out banks."
The key exchanges
John Mann, Labour MP for Bassetlaw "If you are offered a bonus this year will you accept no bonus this year?"
Diamond "I'll make that decision with my family as I did last year," the CEO continues... "You're not a big fan of Barclays are you?"
Mann "I'm a big fan of getting answers from you."
Stewart Hosie, Scottish National MP for Dundee East "Do you understand how toxic this issue is in the real world?"
Diamond "We are sensitive, we are listening, and one of the reasons I was looking forward to today was to have an opportunity to put some balance and some understanding... we've done a very poor job over the years in explaining how the compensation process is integrated in the other aspects... how investment banks contribute to society... and I certainly pledge to do more in that regard...
In the public's eyes, we are all the same. They see all banks as bad. A Barclays or an HSBC never put their organisations at risk. It's not pleasant for us at Barclays. Banks did make mistakes but we are very proud."
David Ruffley, Conservative MP for Bury St Edmunds "Are you grateful to the British taxpayer for subsidising you in this way?"
Diamond "We are very grateful to the central banks. We are thankful to everyone. We need to be responsible."
Banker-bashing "Frankly, the biggest issue is how do we put some of the blame game behind us? 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."
His own bonus "I am committed as chief executive to being responsible and showing any restraint I can... I haven't been offered a bonus yet. That decision is out of my hands. I would discuss [waiving] it with my family."
Bonuses at Barclays "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."
What the Treasury Committee said about him
"This is very nice, but it's not getting to the point. I've got tears pouring down my cheeks... I can hear the bloody bagpipes going."
George Mudie, the Labour MP for Leeds East, in response to Diamond's speech about emigrating to Massachusetts from Scotland, and growing up as one of nine children and saving up for a new bike himself.
"Why is it easier for a man to pass through the eye of a needle than a rich man to pass into the Kingdom of Heaven?"
John Mann, the Labour MP for Bassetlaw, responds to Diamond's circumspect replies on his own bonus.
"Over Christmas I read my seven year old The Emperor's New Clothes... before taking apart his arguments on competition, on the threat that banks will leave. There is no evidence that banks will move. It's extremely disappointing, you are in denial about the taxpayers' support for you; denying a lack of competition in the industry; you're denying customer satisfaction; you're denying the lack of support for small businesses... the emperor is wearing no clothes."
Andrea Leadsom, the Conservative MP for South Northamptonshire.