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January 22, 2010 11:47 pm
Barclays plans to defer payment of up to 100 per cent of bonuses for its top staff, in an attempt to assuage anger over bankers’ pay as pressure on the industry mounts in the wake of US plans for the biggest overhaul of Wall Street since the 1930s.
Bank shares on Friday bore the brunt of a stock market sell-off triggered by fears that they will be hit hard by President Barack Obama’s plans.
The US wants to ban banks from trading on their own account and owning and sponsoring hedge funds or private equity groups.
JPMorgan Chase analysts estimated that Mr Obama’s plans would cost five banks – Goldman Sachs, Morgan Stanley, Credit Suisse, UBS and Deutsche Bank – about $13bn (£8bn).
It emerged that the new rules could disrupt plans by Royal Bank of Scotland to secure a swift sale to JPMorgan of its Sempra Commodities unit, whose business is estimated to rely for half of its profits on proprietary trading.
Amid fears that the US moves will lead to further regulatory action in the UK and Europe, Barclays lost 4.1 per cent, Lloyds fell 4.3 per cent and RBS slipped 1.8 per cent.
The government said it would examine the Obama proposals as they were fleshed out in coming weeks.
The new curbs on proprietary trading were of particular interest, one Treasury official said. That issue, however, will also be addressed by new rules forcing banks to hold more capital.
Under the Barclays plan, its 11-member executive committee, led by chief executive John Varley and comprising Bob Diamond, boss of fast-growing investment banking business Barclays Capital, and the heads of the bank’s other operational businesses will defer up to 100 per cent of their bonuses for up to three years.
The next 2,000 or so staff would have high levels of deferment, typically upwards of 75 per cent for three years, people familiar with the plan said. Lower-ranking staff would have about half of bonuses deferred.
Deferring pay does nothing to mitigate the bank’s liability to the UK’s 50 per cent supertax on bonus pools.
The measures, due to be signed off by Barclays’ internal committees ahead of its full-year results next month, go further than the regulatory requirements set out by the Group of 20 nations in the autumn, which called for 40-60 per cent of bonuses to be deferred.
Credit Suisse, which has pledged to cut bonuses by 5 per cent and its UK managing director bonuses by a further 30 per cent, has also set itself up as a model of remuneration.
Goldman Sachs has scrapped cash bonuses for its top 30 staff.
The bank share falls helped drag the FTSE 100 down 0.6 per cent.
Additional reporting by Jim Pickard
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