Bonuses are essential to recruit staff, banks insist
Bank bosses were adamant yesterday that they would continue to pay seven-figure bonuses to workers, describing them as “essential if we want people to work in our industry”.
They also claimed that high-calibre graduates were starting to think twice about working in the financial services industry because of the growing backlash against bankers.
But the comments sparked fury among politicians who said they were “out of step” and renewed calls for City watchdogs to crack down on bankers' pay.
Bob Diamond, the head of Barclays Capital, whose package has topped £50m during the boom, was speaking as Barclays unveiled first-half pre-tax profits of £2.98bn.
Mr Diamond, the BarCap president, will net $36m for shares he paid $10m to buy. He admitted that the bank had hired staff on multi-year guaranteed bonuses since November — something the City watchdog has since written to every chief executive to warn them not to do.
But Mr Diamond said it would be wrong for the bank not to pay out “if we had really good performance”, and argued that performance-related bonus payments were essential given the bank's “obligation to run a client-first business”.
He said: “It is pay for performance and it is based on principles we have followed for a while now.”
Mr Diamond insisted that fewer than 10% of the staff of Barclays Capital were on guaranteed bonuses and said “less than a handful” of people had been hired on multi-year guarantees — the most controversial element of the way banks pay stars — since November.
HSBC, Britain's biggest bank, warned that the backlash facing bankers in the wake of the financial crisis was putting off graduates from joining what is still Britain's most important industry.
“We clearly see students and graduates thinking twice about financial services and I think we have to be responsible,” said the bank's chief executive Michael Geoghegan.
The comments drew scant sympathy from politicians. Labour MP John McFall, the chairman of the Treasury select committee, said: “The banking industry is out of step with the rest of industry in its compensation arrangements.
“The public can be forgiven for thinking the banks are making hay while the taxpayer pays.”
Vince Cable, the Liberal Democrat treasury spokesman, said: “Without the taxpayer, many bankers would be without a job let alone a huge bonus.
“Their greed and excessive risk-taking led to this crisis which is now costing millions their jobs and many their homes.”