If the banking industry had begun to function properly, one might expect that bonuses and fines would not go hand in hand. After all, that was the old way: the great City fruit machine paid out for staff whether their gambles paid off or not.
So for Barclays to reward its chief executive, Antony Jenkins, with his first bonus since taking over the job in 2012, at the same time as setting aside vast amounts to cover future fines, suggests the system is still not working. But that would be to confuse the need to incentivise a banker who has an eye on the future with a bank that is still wrestling with the huge cost of past misdemeanours.
That Mr Jenkins has made progress is not in doubt. The investment banking division, the legacy of his predecessor Bob Diamond’s global ambition and a source of huge profit and huge conduct problems, has been shrunk. In an effort to rebalance Barclays, its high street bank and Barclaycard are performing better. But of great concern is the extra £750m set aside for fines relating to the alleged rigging of the foreign exchange market, taking Barclays’ total in this area to £1.25bn. After all provisions were totted up, the bank’s profits slumped by a fifth to £2.3bn.
For a chief executive who has preached the importance of banks reforming themselves, it is still impossible to claim the past has been left behind. Some four years ago, Mr Diamond said that the time for banker remorse was over. Since then, Libor rigging, the misselling of payment protection insurance, sanctions busting, money laundering and murky tax affairs have blighted the industry.
At least Barclays’ investors will receive more in dividends than its investment bankers get in bonuses. But it is hard not to think that the bank and its peers must do more to prove they are matching pay closely to performance. It is an issue close to the heart of Barclays’ new chairman, John McFarlane, who promises to speed up reform when he begins the job next month. As he should.Reuse content