Barclays's Diamond Tells U.K. Lawmakers It's Time to End Bonus Apologies
“There was a period of remorse and apology for banks, that period needs to be over,” Diamond told the House of Commons Treasury Committee in London today during 2 1/2 hours of questioning. “The biggest issue is ‘How do we put some of the blame game behind us?’ There’s been apologies and remorse, now we need to build some confidence.”
Pressed repeatedly by committee members on the issue of bonuses, Diamond said the bank would “exercise restraint,” while declining to say whether he would personally forgo a bonus this year.
Barclays filings show that Diamond was eligible to receive more than 110 million pounds ($170 million) between 2005 and 2011 in salary, bonuses and share sale proceeds even after refusing to accept bonuses in 2008 and 2009. British legislators are examining banking practices in the wake of the financial crisis and expenditure cuts that may cause more than 300,000 job losses.
“I’m committed as chief executive to acting responsibly, to showing any restraint I can,” said Diamond, 59. “Bonuses are not taken lightly. We are sensitive. We’re listening.” Asked whether he would reject his own bonus, Diamond said, “if I were to make a personal decision, I would make that decision with my family.”
The bonus issue is going to create “hell on the streets in a few months,” Diamond was told by Labour parliamentarian George Mudie.
“We have had continuous discussions with shareholders” about bonuses, Diamond said. The bank is talking to investors and has not yet decided on its 2010 payout, he said. “The board will be meeting over the next couple of weeks” to decide bonus pools.
Diamond, who became CEO on Jan. 1, led Barclays investment- banking expansion, including the 2008 purchase of Lehman Brothers Holdings Inc.’s U.S. operations. His Barclays Capital unit accounted for 66 percent of the lender’s pretax profit in the first half of 2010, up from half last year.
Diamond, the son of teachers, was born in Concord, Massachusetts, scene of the first battle between colonists and British soldiers during the War of Independence. He was called the “unacceptable face of banking,” by then Business Secretary Peter Mandelson last year in an interview with London’s Times newspaper.
The exchanges in Parliament came as the government switched its focus in talks with U.K. banks from cutting pay to boosting business lending, officials familiar with the situation said, marking a retreat from public statements made last year.
Two government officials, who declined to be identified because the talks are private, said ministers recognized that, however much banks cut bonuses, voters are still likely to view bankers’ pay as too high. They said increases in bank lending might lead to faster economic growth, boosting the government’s popularity.
“So much for sharing the pain,” said Bob Crow, general secretary of the Rail, Maritime and Transport union, in an e- mailed statement today. “My advice to any worker told they should take a pay freeze or a pay cut this year is to point to the bankers, stand firm and demand a fair deal. That is exactly what RMT will be doing. Our members didn’t create this crisis and those that did are laughing all the way to the bank.”
Diamond also told the hearing it is “inappropriate” to call Barclays Capital, the securities unit of the company, a “casino bank”. “We exited proprietary trading in 1998,” he said.
The bank is “committed to increasing lending” in the U.K., though it there is a reduced demand for loans, Diamond said.
Separately, Barclays stock rose as much as 5.5 percent, the biggest gain in six months, after Bank of America Corp. analysts said it doesn’t need to increase capital. The stock traded up 4.4 percent to 288.85 pence at 3:18 p.m. in London.
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