Barclays picks big bonus banker Diamond as next chief

7th September 2010, Comments 0 comments

Barclays bank chose US national Bob Diamond as its next chief executive on Tuesday, risking controversy because he has earned huge bonuses as head of the highly succesful investment banking arm.

Barclays said that British banker John Varley would step down at the end of March, 2011 after more than six years at the helm.

"I am honoured by the board's confidence in me and greatly motivated by the challenge of leading Barclays during the critical period ahead," Diamond said, in reference to the fragile state of the global financial sector.

As head of Barclays Capital, Diamond has been at the forefront of Barclays' transformation from a well-run retail bank into an investment banking giant able to compete with Wall Street titans.

Diamond, 59, is one of the world's highest paid bankers thanks to his success in running Barclays Capital, which in recent years has provided the bulk of the bank's profits.

He was also behind Barclays' purchase of Lehman Brothers' US operations following the investment bank's collapse in 2008.

But Diamond is not without controversy and earlier this year the then business minister Peter Mandelson described him as "the unacceptable face of banking", amid public outrage at bankers' bonuses in general.

Mandelson had accused Diamond of receiving a bonus worth tens of millions of pounds (dollars) -- which Barclays denied.

On Tuesday, Barclays chairman Marcus Agius expressed his delight at Diamond's appointment.

"He is superbly qualified, with more than 30 years' experience in the banking sector, the last 14 of which have been with Barclays," Agius said in a statement.

As chief executive, Diamond will receive an annual salary of 1.35 million pounds (1.62 million euros, 2.08 million dollars) but could earn millions more in bonuses, Barclays said.

He already has an estimated fortune of about 100 million pounds, thanks to massive cash and shares bonuses earned while heading Barclays Capital.

Analysts said that further high pay for Diamond was unlikely to go down well with Britain's new coalition government, which has been highly critical of bankers' bonuses.

Prime Minister David Cameron's official spokesman declined to comment on Diamond's appointment. "This is completely a matter for the board of Barclays," the spokesman told reporters. "It is not an issue for the prime minister."

The Conservative-Liberal Democrat partnership is meanwhile looking into whether Britain's big banks should separate their retail and investment units in the wake of the financial crisis.

The 2008 financial crisis which brought down a number of banks has been partly blamed on bankers taking great risks in a bid to win massive bonuses.

"In times of austerity, industry compensation continues to sit uncomfortably with politicians and the electorate, while questions over broader European banking strength have resurfaced," Keith Bowman, an analyst at Hargreaves Lansdown Stockbrokers, said on Tuesday.

Diamond's appointment comes amid renewed concerns surrounding the health of European banks, with the latest strains appearing over Anglo Irish Bank in Dublin.

A report in the Wall Street Journal on Tuesday said that Europe's "stress tests" on major banks "minimised" their debt risks and "understated some lenders' holdings of potentially risky government debt".

New York-based Diamond, who will relocate to London, will become deputy chief executive on October 1 ahead of replacing 54-year-old Varley, who managed to steer Barclays through the financial crisis without the aid of government support.

Varley, who reportedly always planned to retire next year, said it had been a "great privilege" to serve as chief executive.

The price of shares in Barclays fell by 3.64 percent to 311 pence on London's benchmark FTSE 100 index, which was down one percent in midday trade. bcp/hd

© 2010 AFP

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