Barclays has announced it is halving bonuses for 2008 as the government rejects calls to cap bank bonuses.
The banking giant posted a 14% drop in pre-tax annual profits to £6.08bn, and its chief executive John Varley said bonuses would be down 48% on 2007, with many paid in deferred shares.
“It is important to make the distinction between those banks which have made a profit and those which have not when it comes to bonuses,” Varley said.
“This is clearly a very important subject and I absolutely understand why it has got the attention of the world.”
He added that main board directors would also forgo their bonuses.
Meanwhile, ministers have rejected calls to cap company bonuses following US president Barack Obama’s announcement to prevent bank executive’s bonuses reaching more than $50,000 (£33,000).
Instead, ministers said they would use the government’s stake in the Royal Bank of Scotland and Lloyds Banking Group to make sure bank bosses would not be rewarded for failure.
An independent review announced by the Treasury will investigate pay structures and the incentivising of risks in banks, and is expected to run for at least six months.
However, the eventual findings will reportedly not affect bonuses handed out for 2008, and may also miss some awarded to employees for 2009.
Yvette Cooper, chief secretary to the Treasury, said nevertheless the review would be effective in ending the cycle of the bonus culture that encouraged risk-taking.
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“We’ve already ruled out the cash bonuses for the boards of the banks who’ve received government help, and the starting point has got to be that City bankers, whose decisions led to massive losses and helped cause the credit crunch, should not be getting any bonuses this year, period,” she said.
“There’s an issue about we’ve got to deal with this year’s bonuses but … it’s not just about the banks that have received funding from the government, there’s also this wider issue about the way in which the bonus culture seems to have increased the risks that the banks were taking across the board.”
