Barclays Chief Executive Officer Robert Diamond and Anthony Jenkins, head of the bank’s consumer unit, faced questioning yesterday on banker pay and regulatory change by the House of Commons Treasury Committee in London.
“Responses from management were antagonistic and disingenuous, in our view,” Packard wrote in a note to clients today. “From a shareholder perspective we find the relationship between the banks’ management and the politicians and regulators unhealthy, and we ascribe 99 percent of the blame to bank management.”
Bank employees are paid too much compared with shareholders and this should be rectified this year, according to a letter sent on Dec. 5 to bank remuneration committee chairmen by the Association of British Insurers, which represents investors with 1.5 trillion pounds ($2.3 trillion) of assets, or 20 percent of the U.K.’s net worth. Banks should not rely on dismissals to reduce costs and should also cut the compensation of highly paid bankers, it said.
During a series of exchanges with Treasury Committee Chairman Andrew Tyrie on the merits of the ABI letter, Diamond responded, “That’s just a sound bite; the sound bite doesn’t sound right to me.”
Discussing banker pay rather than the Independent Commission on Banking’s proposals for U.K. lenders, the subject of the committee’s inquiry, was “disappointing,” Diamond said. “We’re right on to the same issues we ended with last time,” he said. “I don’t think it’s a matter of agree of disagree,” the 60 year-old American responded, when asked whether he accepted the ABI assessment on unbalanced rewards for bankers and shareholders.
“You would agree it’s quite difficult to get straight answers to reasonably straight questions,” Tyrie said.
Barclays declined to comment on the Seymour Pierce note. Packard is ranked third among 32 analysts covering Barclays, according to data compiled by Bloomberg.
The cost of the ICB’s proposals will probably be “north of 1 billion pounds,” Diamond said later in the session.
John Vickers, ICB chairman, recommended in September that banks insulate consumer units from investment banking as part of plans to increase stability in the financial system. The proposals may cost the industry as much 7 billion pounds, the ICB report said, and should be implemented by the government in 2019.
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