Powered by MOMENTUM MEDIA
subscribe to our newsletter

Big bonuses keep us competitive, says Barclays

Barclays insists the bank must pay more to prevent staff being poached by competitors despite a revolt by the bank’s largest shareholders against bigger bonuses.

Barclays’ and RBS’ desire to increase bonuses when bank profits have declined will lead to a weakening of the banks’ financial stability, according to Warwick Business School professor of financial economics John Thanassoulis.

“But Barclays felt they had no choice,” Mr Thanassoulis said.

“Barclays chairman Sir David Walker noted at the AGM that Barclays’ business was targeted aggressively by competitors keen to poach Barclays’ best staff,” he said.

“RBS also said they had to pay more if they were to remain competitive.”

Advertisement
Advertisement

Barclays’ decision to pay higher bonuses comes after a dramatic shareholder revolt led by Standard Life, one of the bank’s largest institutional investors.
Competitors on both sides of the Atlantic have aggressively attacked Barclays’ firm decision to increase banker bonuses.

Meanwhile, the bank left its dividend unchanged and had tapped investors for £5.8 billion (approximately $10.5 billion) in a rights issue last October, the Financial Times reported last week.

The increased bonus pool at Barclays alone, most of which is earmarked for investment bankers, is equivalent to 1.7 per cent of the investment bank’s risk-weighted assets.

“To put this into perspective, the global response to the financial crisis has been to increase the proportion of risk-weighted assets funded by safe equity capital by a similar proportion,” professor Thanassoulis said.

“Barclays and RBS are both victims of a system of high pay levels that lead to financial instability as banks over-reach themselves to hire those they think can bring in extra business or generate higher returns,” he said.

PROMOTED CONTENT


New research from Warwick Business School studies the aggressive poaching that is the key driver of high bankers’ pay.

Professor Thanassoulis proposes that a cap on total remuneration for investment bankers in proportion to risk-weighted assets applied to all banks would contribute significantly to financial stability.

“The pay revolt at Barclays highlights that the unfettered system of pay competition is bad for shareholders and is bad for financial stability,” he said.

 

Big bonuses keep us competitive, says Barclays
mortgagebusiness

Latest News

The cash rate for the last month of 2021 has been confirmed, as analysts continue to speculate on when it will move next. ...

The big four bank has revealed plans to purchase a personal finance management platform from AMP, with plans to integrate the tool into its ...

The federal Treasurer has expressed concerns at the housing market running hot, but he is not sure if APRA will take further lending interve...

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

Do you think APRA's bank buffer changes will see more borrowers use non-banks?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.