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Barclays Said to Consider Pay Plan to Mitigate EU Bonus Caps

Barclays Plc (BARC), the U.K.’s second-largest bank by assets, is drawing up plans to revamp its pay structure to counter European Union proposals on executive compensation, a person briefed on the discussions said.

The lender may give executives an additional cash payment on top of base pay and variable bonuses, said the person, who asked not to be identified because the matter is private. It would help the London-based bank to control fixed costs, while maintaining performance-related pay for senior employees, the person said.

The plans come after the EU brokered a draft deal in February to outlaw banker bonuses that are more than twice fixed pay, a move lawmakers said would prevent excessive payouts and curb irresponsible risk-taking. U.K. Chancellor of the Exchequer George Osborne opposed the curbs, saying they would harm the competitiveness of the nation’s finance industry.

Barclays’s plan, which is one of many being considered, is at an early stage and would need shareholder approval, said the person. Sky News reported the story earlier today.

The U.K. has 1,300 code staff with regulatory approval who would be affected by the EU cap, Andrew Bailey, Britain’s top bank supervisor, said on March 13. According to “back of the envelope” calculations, employees at banks may get as much as 500 million pounds ($808 million) more in base pay to offset the limit, he said.

Photographer: Simon Dawson/Bloomberg

Barclays Plc may give executives an additional cash payment on top of base pay and variable bonuses, said the person, who asked not to be identified because the matter is private. Close

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Photographer: Simon Dawson/Bloomberg

Barclays Plc may give executives an additional cash payment on top of base pay and variable bonuses, said the person, who asked not to be identified because the matter is private.

The European Banking Authority, which coordinates the work of supervisors in the 28-nation bloc, is deciding which employees will be covered by the curbs after the EU said they would apply to risk-takers. Banks are trying to have the rules apply to fewer workers by recommending that the definition of a risk-taker be made stricter, people familiar with that process said in April.

HSBC Holdings Plc (HSBA), Europe’s largest lender, said in August it may raise salaries to combat the proposed EU rules.

“We’re very confident that we will be able to come up with a competitive remuneration proposal,” Chairman Douglas Flint said at the time. Raising salaries is “one option,” he said.

-- Editors: Jon Menon, Dylan Griffiths

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net.

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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