Chancellor of the Exchequer Alistair Darling urged pay restraint and moderation from UK banks, and still they raised compensation.
Barclays Capital, the investment-banking unit of Barclays Plc, increased its pay and bonuses per employee by about 93 per cent in 2009, according to company filings. Royal Bank of Scotland Group Plc, the UK’s biggest government-owned bank, raised total compensation per employee by about 73 per cent last year. Of the UK’s three largest banks, HSBC Holdings Plc was the only one where pay declined slightly in its investment bank.
“The banks are just paying lip-service to what they think politicians and the public want to hear while carrying on as normal,” said Chris Roebuck, a visiting professor at Cass Business School in London. “The apparent changes they’ve made to compensation are just an exercise in smoke and mirrors.”
Banks are under scrutiny from governments worldwide to reduce compensation amid public anger about trillions of taxpayer dollars used to bail out lenders during the credit crisis. In December, Darling introduced a one-time 50 per cent levy on discretionary bank bonuses of more than 25,000 pounds ($37,500) to encourage banks to build up their capital.
The Treasury, which initially said the tax would raise 550 million pounds, now estimates it may net as much as 2 billion pounds, according to a government official who declined to be identified. Barclays, HSBC, RBS and Lloyds Banking Group Plc alone said they will pay about 685 million pounds to cover the tax.
In an attempt to diffuse anger about the size of bonuses, the chief executive officers of RBS, Lloyds and Barclays waived their bonuses for 2009. HSBC CEO Michael Geoghegan will also forgo his bonus, donating as much as 4 million pounds to educational charities.
“From a public relations point of view, the bonus tax has been a partial success because it’s made the government look like it’s cracking down,” said Daniel Naftalin, a partner at law firm Mishcon de Reya in London. “The bonus tax failed in the sense that it doesn’t appear to have significantly reduced the size of the bonuses.”
Barclays paid its investment-bank employees about 191,000 pounds each in 2009 compared with an average payout of 99,000 pounds for the previous year, the filings show. RBS set aside about 173,000 pounds last year in total compensation per employee, up from about 100,000 in 2008. HSBC awarded each employee an average of about $166,000 in 2009. The average compensation was calculated as a percentage of investment-bank revenue, or total staff costs at the individual banks, divided by the number of employees.
