Barclays CEO to Bloomberg TV: “people get it” on pay

Updated on

Barclays CEO Bob Diamond spoke to Bloomberg TV’s Erik Schatzker live from the World Economic Forum in Davos and said that he thinks “people get it” that compensation in the financial industry will be down this year.

On what Diamond would say to Barclays employees who are disgruntled about pay:


“I haven’t really thought of it that way. We’re entering the year-end process of compensation reviews. I think it’s an open discussion during the year of how businesses and how individuals perform and now we’re just trying to execute on the balance that we all try and strike between being responsible and being competitive.  I think people get it. I think industry compensation is down this year because the performance in the industry is down. So I think they get it.”


“I think if we weren’t treating [top producers] fairly we would look at it objectively and try and get to the underlying causes, but I think everyone has a decision to make about what industry they want to work in or what firm they want to work for.”


On whether people in the financial services industry still have options about where they want to work since competitors aren’t hiring:


“I don’t recognize that [it’s a buyer’s market] at Barclays. I think it tends to be a focus on individual traders.”


“Not everyone wants to be in this industry. But I’ll give you a statistic that is important. Last year, we had applications from 107,000 kids at university, of which we had positions for 1,500. So there’s still a lot of people who want to come into the financial services industry, particularly for organizations such as Barclays that have a diversified set of businesses that are very focused on their clients and growing the business.”


On whether Barclays employees should expect compensation changes like those at Morgan Stanley:


“I don’t want to get into this year’s decisions because we haven’t made them public and we haven’t discussed the final decisions internally. But no one at Barclays is going to be surprised that in striking that balance between being responsible and being competitive, we’re responding to the FPC in the UK and their desire for, in difficult times, banks to build capital. We ‘re responding to the higher deferral levels and higher levels of equity. That’s not inconsistent with what we have been doing for the past couple of years.”


On Diamond’s own compensation package:


“Since becoming chief executive, I have a very specific contract. You can look it up because it’s public and that’s a decision the board will take.”


On how Barclays business is doing:


“There’s a lot of change going on…When I look at our business last year, clearly in this economic environment, and with these capital levels, we’re all focused on increasing our returns. But what really pleased us last year, and our final results don’t come out for a couple of weeks, but if we look at the results that are public for the first nine months, every one of our business lines was improving its competitive positioning and was improving its market share. The zero interest rate environment in the major developed economies is certainly presenting a challenge to banking.  In terms of continuing to focus on clients and improving the competitive position, we feel pretty good.”


On the zero interest rate environment and other challenges to Barclays:


“If we look at the number of challenges that we face, [the zero interest rate environment] is one of the big ones. Already, and it is only January, and January typically is kind of a rebound month cyclically in the banking business, but we’ve certainly seen a big change – driven somewhat by more confidence in the U.S. economy. I think we’ll see a third handle in GNP for Q4 but I think most importantly, more confidence that Europe is on the right path and has the right direction. The confidence that the markets have taken from the Governor of the Central Bank Draghi and the impact that the longer term repo operation has had – I do think there’s more confidence in the market today.”


“The other [big challenge] has to be the regulatory environment.  It’s a regulatory environment we’ve been expecting to be more intrusive and higher levels of capital. The challenge there is simple. We know we want to make the financial system safer and sounder but we also know the importance of driving the economy, providing opportunity for job creation and…keeping a balance amongst the G20 or amongst the major economies so that we encourage the continued development of international banking and not the return to protectionism and Balkanisation.”


On whether Barclays is at a disadvantage when it comes to regulation:


“I think you are referring to the Vickers Report and to the Independent Commission on Banking. That is a type of example of the Balkanisation I’m talking about.


“We’ve been very public that we would have preferred a different route. That ring fencing of the retail banking operations will increase the costs of retail and business banking in the U.K. We’ve also been clear that the decision’s made, we’re moving on, we’re beginning to implement, and we’ll make the best of the situation.”


On whether all of Barclays businesses should be under one roof:


“The universal banking model is very, very strong. It’s diversifier of risk, not an aggregator of risk.  When I look at the impact of Barclays during the most difficult times in the environment, we’ve seen an inflow of deposits and frankly have been a stabiliser for the financial markets.”


“From a micro point of view in terms of Barclays, it is so exciting to me, when I travel across Africa, we have businesses there in eleven different countries. When I travel in the U.K. and I meet small and medium-sized businesses, our smallest businesses all have international trade, are all doing cross-border business between the African businesses, between Africa and China, between Africa and India. But in the U.K., most of the businesses have exports to Europe have exports to Africa. So the need for risk management, the need for our underwriting capability, is something that these businesses very much want.”


On whether there is any scenario where it would make sense for Barclays to split up:


“You can imagine that we’ve looked at all the scenarios over the last three-four years, from a a shareholder point of view and from a customer and client point of view.”

“We continue to believe that the strength of the universal banking model is what they want. It brings with it not just a diversification of risk but a diversification of profitability. There have been years where the investment bank might have been two-thirds of the earnings and retail and business banking a third of the earnings. We’ve seen other years during this period where it’s been just the opposite: our retail and business bank have been the strong performer and our investment bank, as we’ve seen in 2011 across the industry, faced more challenges.”


On how Barclays business compares to British competitors:


“If I speak broadly about Europe, I think that both the U.S. and the U.K. were probably a bit faster in terms of adding capital, reducing leverage, adding pools of liquidity…


“I think there’s still some challenges across Europe where a number of banks with the higher capital rules still have businesses that are sub-scale. I think one of the decisions we made early on is that in this environment of higher capital charges and more intrusive regulation, every single business we’re in has to have scale and brand and technology, or we’re going to have to make the tough decisions.


“In the case of Barclays, you’ve seen over the last year or so the exit of retail banking in Indonesia. The exit of retail banking in Russia -two examples of business where we didn’t feel we could get to scale.”

Leave a Comment