Britain spars over bankers' bonuses

11th January 2011, Comments 0 comments

Barclays bank boss Bob Diamond acknowledged a need for a "safer and sounder" bonus system on Tuesday but defended performance-related remuneration amid growing anger over bankers' pay.

Diamond's comments to lawmakers came shortly before finance minister George Osborne warned banks that "nothing is off the table" if they are not "responsible" on pay and bonuses.

However it was unclear whether Osborne's warning held much weight as The Daily Telegraph reported that Prime Minister David Cameron's office admitted it was unable to prevent huge bonuses being paid in the coming weeks.

Barclays chief executive Diamond is reportedly set to be offered a bonus of about eight million pounds (9.6 million euros, 12.5 million dollars) by the British bank.

"I've not been awarded a bonus yet," the American told a cross-party panel of lawmakers on Tuesday, adding it meant he had yet to decide whether to waive a Barclays bonus for a third year running.

The chief executive of bailed-out Royal Bank of Scotland (RBS), Stephen Hester, was meanwhile reportedly on course to receive 6.8 million pounds in annual bonuses and salary.

RBS is 80-percent owned by the British taxpayer after a massive government bailout which followed the bank being ravaged by the credit crunch and the takeover of Dutch giant ABN Amro at the top of the market in 2007.

"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," Diamond told lawmakers on Tuesday.

"I don't agree that I can isolate bonuses and assume that would have no consequences on the rest of the business," Diamond added as he addressed the Treasury Select Committee.

The high-profile banker is infamous in Britain for pocketing huge bonuses as head of Barclays' highly successful investment banking arm.

He became Barclays' chief executive on January 1, replacing Briton John Varley who had been at the helm for six years.

Banks in Britain are facing increased pressure to award smaller bonuses this year as the Conservative-Liberal coalition government demands restraint and the opposition Labour party calls for the pay-outs to be more heavily taxed.

Chancellor of the Exchequer Osborne on Tuesday called for a "a new settlement" with banks.

"They should lend to the British economy, contribute to the British exchequer, provide jobs for British people, (be) responsible on pay and bonuses, and make sure that Britain is a world centre of a properly regulated and internationally competitive financial services industry," he told parliament.

"If the banks cannot commit to that, I have made it very clear to them that nothing is off the table."

Osborne was addressing parliament after Labour's finance spokesman, Alan Johnson, had requested "urgent" parliamentary dialogue over the banking sector's looming bonus season.

"The coalition goes from the scent of the rose garden to the stench of broken promises," Johnson told the lower House of Commons in the presence of Osborne.

"The chancellor, who said we're all in this together (amid Britain's austerity drive), bows to the rich and powerful whilst bearing down on everyone else. His sneering arrogance won't get him out of this one," Johnson added.

Cameron has meanwhile warned that he wants a smaller bonus pool than last year, while his deputy, Liberal Democrat leader Nick Clegg, has said sky-high pay-outs seemed to come "from a parallel universe."

© 2011 AFP

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