Diamond Bob grilled by MPs

The bonus debate continues apace - and now Barclays CEO Bob Diamond is in the hotseat.

by Emma Haslett
Last Updated: 19 Jan 2011
You can’t help but feel a bit sorry for Bob ‘unacceptable face of banking’ Diamond, who may be just 11 days into his new job as Barclays CEO, but has still had to endure a face-off with the Treasury Select Committee. Diamond was officially there to talk bank competition, but the topic of the day has been bank bonuses. Which, given the PM has finally given banks the go-ahead to pay the full estimated £7bn worth of bonuses it’s planning to award this year, could probably do with more investigation by the Government…

These things are always a great opportunity to watch some of the masters of the universe be given a verbal going-over by a few scruffy MPs, and Diamond was given a particularly tough grilling by Labour's Chuka Umunna. Diamond shrugged it off, attempting to move on from the usual charges of irresponsibility by pointing out that banks are aware of the role they played in the recession and, three years on, are bringing in tougher risk-management practices as appropriate. ‘How do we get away from the blame game?’ he asked. ‘Banks need a big dose of confidence’. Ah, bless. And a hug, too?

But bonuses are still a problem. We’re all familiar with the banks’ argument – that to run a competitive business, you need to remunerate your top people at a competitive rate. But that’s still a tough pill to swallow for taxpayers, who can’t help but point out that, given it was bankers’ risky activities that meant they’re losing jobs and struggling to pay their mortgages in the first place, they should be held accountable.

The Government, for its part, has decided that an annual levy on banks’ balance sheets, which should yield about £2.5bn a year, is enough. And while Labour has been lambasting it for dropping the bonus tax introduced by Alistair Darling last year (to be fair, even Darling originally said it would be a one-off), the Coalition has been going down other routes. One idea the Chancellor is pushing is an EU-wide deal which would force banks to disclose pay bands above £1m. And let’s not forget that the Financial Services Authority has already signed up to EU rules which curb bonus payments…

The Government now faces a tough choice between upsetting taxpayers, and putting banks off staying in the UK. Asked today whether Barclays HQ would stay in the City, Diamond’s response was non-committal: ‘I can’t give a guarantee, but that is our intention’. As the former head of BarCap, Barclay’s massive investment banking arm, he should know a thing or two about rewarding top talent. Diamond insisted that he ‘created’ BarCap by building a ‘proper’ bonus structure. It’s a poser, innit…

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