Andy Rain/European Pressphoto AgencyA branch of Barclays in London.
8:57 p.m. | Updated
LONDON — British banks have been suffering amid dismal earnings, scandals and regulatory investigations, but three of the country’s largest financial firms handed out seven-figure pay packages to hundreds of employees last year.
The disclosures this week add to the growing debate over compensation, as regulators look to rein in bankers’ pay. On Friday, one labor union official in Britain criticized Barclays, calling the bank’s payouts “obscene.”
Since the financial crisis, regulators and investors have been pushing banks to rethink their pay practices. While the banks have made some efforts in recent years, compensations levels remain persistently high, prompting regulators to take further action.
Last week, the European Union proposed to cap bonuses at no more than the annual salary for the region’s bankers. The British government has resisted such efforts, saying the move could prompt an exodus of talent and could have the “perverse” effect of raising fixed salaries.
But the region’s banks cannot easily defend their outsize pay in the current environment. British institutions, already struggling to bolster profits since the crisis, have been tarnished by a series of scandals. In the latest disclosures on Friday, Royal Bank of Scotland, which is 82 percent owned by the British government after receiving a bailout during the financial crisis, announced on Friday that 93 of its employees earned more than more than £1 million, or $1.5 million, last year. The payments came even as R.B.S. reported a multibillion-pound loss last year. The bank did not disclose the similar figures of staff compensation for 2011.
Barclays, which came under fire after agreeing to a $450 million fine with American and British authorities related to the rate-rigging scandal, said in an annual report on Friday that 428 of its staff members still earned more than $1.5 million in 2012.
The British bank said the number of people earning more than that amount fell 10 percent compared with 2011. Barclays also paid five bankers more than $7.5 million each last year, down from 17 in 2011.
Another British bank, HSBC, said on Monday that 204 members of its staff fell into the million-pound-or-more pay bracket, a 6 percent increase from the previous year. HSBC, Britain’s biggest bank, also said on Monday that its net profit fell 17 percent last year because of a record fine to settle money-laundering charges and charges related to the value of its debt. HSBC settled charges that it transferred billions of dollars for nations under United States sanctions, enabled Mexican drug cartels to launder tainted money through the American financial system, and worked closely with Saudi Arabian banks linked to terrorist organizations.
The continued large payouts for some bank employees contrast with weak earnings at banks and a series of scandals connected to the manipulation of the London interbank offered rate, or Libor, and money-laundering allegations.
Last year, Barclays reported a net loss of $1.5 billion, in contrast with a profit of $4.5 billion for 2011. The loss was driven by provisions to cover legal costs related to the rate-rigging scandal and other improper activities. The British bank has also announced a wide-ranging cost reduction program that includes cutting 3,700 jobs and closing some business units and branches.
Amid widespread criticism, financial institutions have been reining in pay, partly driven by a fall in earnings connected to the European debt crisis.
At Barclays, the bank’s staff members will be evaluated against a set of standards, including integrity, put together by the bank’s chief executive, Antony Jenkins.
“We have been justifiably criticized for failures to engage effectively with and explain our decisions to shareholders and the wider public,” John Sunderland, chairman of the board remuneration committee, wrote in Barclays’ annual report released Friday. “We must also ensure that we pay no more than necessary to achieve Barclays objectives, and that we eliminate undeserved remuneration.”
At a recent meeting with investors, Mr. Jenkins, who took over as chief executive in August, also hinted that more job cuts could be in store for Barclays.
Talking about his priority to reduce costs and use more computer programs and technology to do so, he said that the bank could be looking for a way to operate with as few as 100,000 staff members over the next decade or so, according to a person with direct knowledge of his comments, who declined to be identified because the comments were not made in public. Barclays currently employs about 140,000.
As part of the overhaul, Barclays clawed back $450 million of deferred bonuses because of the bank’s involvement in the scandals, which also led to the resignation of Robert E. Diamond Jr. as its chief executive.
Barclays said it paid executive directors in total in 2012 less than half of what they received a year earlier. Mr. Jenkins bowed to public pressure and announced earlier that he would not take an annual bonus for 2012. His total remuneration was $3.9 million for last year, including $1.25 million in salary and $2.3 million as part of a long-term incentive plan. Mr. Diamond earned $9.5 million in 2011, according to the firm’s annual report.
The fate of the Royal Bank of Scotland continues to be a heated topic for political leaders. Mervyn A. King, the departing governor of the Bank of England, said at a British parliamentary hearing this week that R.B.S. could be split up in an effort to return ownership of the firm to the private sector.
“The whole idea of a bank being 82 percent owned by the taxpayer, run at arm’s length from the government, is a nonsense,” Mr. King said on Wednesday.
Royal Bank of Scotland also said it had taken back $453 million in current and future bonuses, mostly from its investment banking division, after the bank reached a $612 million settlement with authorities over its Libor issues.
Stephen Hester, the chief of Royal Bank of Scotland, earned $2.4 million last year, though he declined a bonus for 2012.
Article source: http://dealbook.nytimes.com/2013/03/08/fewer-barclays-employees-made-more-than-1-million/?partner=rss&emc=rss
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