Barclays Will Pay 7% Interest to Senior Employees on Deferred Cash Bonuses
Barclays Chief Executive Officer Robert Diamond
Tomohiro Ohsumi/Bloomberg
Barclays said earlier this year that it was awarding its Chief Executive Officer Robert Diamond, seen here, a 6.5 million-pound ($10.8 million) bonus, pushing his total compensation to 10.1 million pounds.
Barclays said earlier this year that it was awarding its Chief Executive Officer Robert Diamond, seen here, a 6.5 million-pound ($10.8 million) bonus, pushing his total compensation to 10.1 million pounds. Photographer: Tomohiro Ohsumi/Bloomberg
Barclays Plc (BARC) will pay 7 percent interest annually to senior employees on cash bonuses deferred for at least five years under the bank’s plan to link compensation with long-term performance.
The final cash payment would be forfeited if the bank’s core Tier 1 capital ratio, a measure of financial strength, falls below 7 percent or if the staff member leaves, Simon Hodges, a director in the bank’s compensation and benefits team, said in a speech in London today. The bank’s highest return for customers is a 4.25 percent rate on a four-year bond.
The program started in February and is “targeted only at very senior people,” Hodges said. The so-called contingent capital plan features instruments that behave like bonds which convert into a bank’s ordinary shares when a specific trigger event occurs.
European Union regulators approved rules to curb incentives for excessive risk-taking last year, imposing limits on cash payouts and the size of bankers’ bonuses. As much as 60 percent of a bonus payout for risk-takers and senior managers must be deferred for at least three years, and half of the remaining amount must be in the form of shares.
Barclays, the U.K.’s third-largest bank by assets, said earlier this year that it was awarding its Chief Executive Officer Robert Diamond a 6.5 million-pound ($10.5 million) bonus, pushing his total compensation to 10.1 million pounds.
‘Higher Interest’
“This is how they sell CoCos in the market,” Darren Fox, a financial services lawyer at Simmons & Simmons LLP in London, said in a telephone interview. “They carry a higher interest rate because of the risk they could turn into nothing.”
The interest paid on the deferred cash bonuses exceeds the highest rate paid on customer deposits, according to Barclays’s website.
A four-year fixed rate savings bond currently on deposits of 50,000 pounds to 1 million pounds pays 4.25 percent interest. The bank’s Golden ISA pays 2.22 percent, according to the website. The bank paid investors a dividend of 5.5 pence a share last year, a yield of about 2 percent on its shares.
A spokesman for Barclays wasn’t immediately available to comment.
To contact the reporter on this story: Ben Moshinsky in London at bmoshinsky@bloomberg.net.
To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.
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