NEW Barclays chairman Sir David Walker risks “a mass exodus” of investment bankers if his review of pay for senior staff is handled clumsily, a top City headhunter warned yesterday.
The comments came after weekend interviews in which Walker vowed to launch a “root-and-branch reform” of Barclays’s pay policies in a culture of “apparent greed” within the bank.
Walker, who has served as deputy governor of the Bank of England and authored reports on corporate governance and private equity, also said he agreed “in principle” with customers paying to use current accounts and the end of the free banking model.
But Jonathan Evans, chairman of international search firm Sammons Associates, said there were dangers if Barclays’ new chairman – who is joining the bank following the departure of Marcus Agius and chief executive Bob Diamond – went too far.
Evans, whose clients have included the likes of Goldman Sachs and Bank of America Merrill Lynch, said: “There’s no way Barclays can have a pay policy that goes against the way the City operates.
“Going totally against the tide on compensation at the bank would see a mass exodus of its talent. Sir David is not going to change the ethics of the way bankers are justifiably paid by performance.
“If someone earns a bank £50 million they deserve to be rewarded handsomely. Otherwise they will desert to the competition. Barclays is clearly a leading investment bank. It will not be able to attract top talent if they are not capable of paying market rates.”
The shake-up at the top of the bank came following recent heavy fines by both UK and US regulators after Barclays was the first in the industry to admit its traders had been involved in trying to manipulate the London Interbank Offered Rate (Libor).
Simon Willis, a banking analyst at Daniel Stewart, believes Walker’s initial view of there being too generous a remuneration policy at Barclays was right, but change would come with “attendant risks of key staff leaving”.
Willis, who has Barclays as his number one pick in the sector, said: “It’s absolutely the right thing for the new chairman to be saying in terms of reputation management.
“It is the right thing from the view of shareholders in the bank who are more important just now, and he has got to manage their expectations as well. There are some risks of losing top people, however, and I would expect Barclays to continue to pay them well to retain them.”
Some industry observers believe that Walker is too old a hand to take the risk of too Draconian a pay crackdown, however, and that he will adopt a balanced approach.
One senior banking source said: “Barclays has very recently been involved in a scandal, there is naturally pressure from shareholders and the man in the street, so the new chairman has to be seen to be politically doing and saying the right thing.”
Consumer groups, meanwhile, are expected to be furious about Walker’s admission that he is not wedded to free current account banking in principle, and that he believes some industry mis-selling to the public was caused by bank accounts being offered for free.
• Accountancy firm PwC predicts a potential 20 per cent bounceback in banks’ share price valuations over the next two years as their cost of equity reduces, in a report out today.
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