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February 5, 2013 7:40 am
Barclays is to cut its bonus pool after a year of expensive scandals at the bank.
The cost of those scandals rose again on Tuesday as Barclays increased by £1bn the amount set aside to cover mis-sold financial products.
Appearing before the Parliamentary Commission on Banking Standards, Antony Jenkins, chief executive, said Barclays had “adjusted” its bonus pool “substantially” to “reflect the events of 2012”. He declined to quantify the reduction.
His testimony – part of the commission’s examination of culture and practice in the City – came a day after George Osborne endorsed stiffer sanctions for banks that fail to comply with planned regulatory reforms in the sector.
Repairing Barclays’ battered reputation has been one of Mr Jenkins’ top priorities since he took the reins as chief executive last August.
But the beefed-up provision to compensate victims of mis-selling shone a spotlight on his former role as head of Barclaycard, a division where payment protection insurance (PPI) was sold, during a near-three-hour grilling.
Asked by commission member Lady Kramer why he had not resigned when the PPI mis-selling scandal emerged, Mr Jenkins said it was a question of proportionality and that the product had been modified.
Barclays had earlier said it would increase the amount set aside to pay those who were mis-sold PPI by another £600m, taking its total to £2.6bn. It also pledged almost to double to £850m its provisions for mis-selling of interest-rate hedging products to businesses.
Mr Jenkins did not definitively rule out more provisions after setting aside a total of £3.4bn for both PPI and interest rate products. “I’m as confident as I can be at this point,” he said of the £850m set aside for the latter.
However pay was the main flashpoint in exchanges between the commission and Mr Jenkins, who was joined by Sir David Walker, Barclays chairman.
Sir David expressed support for Barclays’ remuneration committee chairman, Sir John Sunderland, who faced criticism from the commission under a week ago for defending a £2.7m bonus to former chief executive Bob Diamond.
“I’m not interested in disinterring what might have happened in the past,” Sir David said. “The remuneration committee chairman is doing a very good job.”
Pay was also at the heart of an exchange between Mr Jenkins and Justin Welby, in the latter’s first full day as Archbishop of Canterbury.
Dr Welby questioned whether Mr Jenkins’s recent message to staff outlining a set of core values was compatible with the high levels of pay in the sector. Mr Jenkins reiterated that performances and rewards would be judged against those core values, such as integrity and respect for others.
“You will not be able to be a top-ranked performer at Barclays if you don’t deliver in line with the values,” he said.
The Barclays chief announced last week that he would forgo his own bonus for 2012, saying it would be wrong for him to receive an award after scandals at the bank. He had been eligible for up to £2.75m.
Mr Jenkins has always been candid about the need for change at Barclays.
But the commission members voiced scepticism about how far cultural transformation at the bank could go.
“It doesn’t really matter what the scandal is, Barclays seems to have a finger in every one of those pies,” commented Andrew Tyrie, the commission chairman.
When asked if there was anything linked to Barclays’ 2008 fundraising with Qatari investors that could cause more embarrassment and loss of trust, Mr Walker said the bank was unable to comment because of an investigation by the Financial Services Authority and the Serious Fraud Office.
“It is clear from the evidence today that the challenge facing Barclays to reform its culture is huge,” Mr Tyrie told the Financial Times after the hearing. “We will need reassurance on a number of fronts, not least in the delivery of documents we have requested.”
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