Withhold bankers’ bonuses for a decade, says Barclays man

Bankers’ bonuses should be withheld for up to a decade to give managers a longer-term view of their business, the new deputy chairman of Barclays has said.

Sir Gerry Grimstone said he wanted to move “to a system where a large part of variable remuneration are shares that you hold in the organisation for five years or 10 years”, reports The Guardian.

“When you do that, management’s time horizon extends,” Grimstone added.

Banks are already required to defer bonuses for seven years under new rules and Grimstone, who was quoted by Bloomberg, was speaking at conference that coincided with the publication of the first annual review of the industry issued by the Banking Standards Board.

The BSB – set up in the wake of the Libor-rigging scandal and intended to bolster the reputation of the industry – came into being last April.

It has not published any industry-wide standards, but instead has spent its first nine months reviewing the internal culture of 10 founding members, and said it was not attempting to measure firms against a “one-size-fits all culture template”.

The BSB’s annual review – described as underwhelming by one critic – set out a number of ideas for banks to work on.

“In many retail banks, aggressive sales targets appear to have been removed or softened,” the review said. “This has produced a lack of certainty in some cases among staff and managers as to how performance is in practice now measured.”

It also said that “a broader concept of diversity and a more transparent approach to measuring success, and one more clearly rooted in the firm’s own purpose and business interests, would help many firms improve their effectiveness in fostering the culture that they are working hard in different ways to create”.

Alison Cottrell, the board’s chief executive, said that one of the areas she would be working on this year would be developing voluntary standards for the industry.

The Institute of Chartered Accountants in England and Wales (ICAEW) acknowledged that it took time to create new organisations but said not enough was being done to restore public confidence in the sector.

“Overall progress is a little underwhelming,” said Iain Coke, head of ICAEW’s financial services faculty.

“The objective is to restore public trust. Useful as it may be to provide private feedback to banks on how they compare with their peers, this is unlikely to inspire public confidence.

“The BSB should have two priority objectives: to start the process of setting standards; and to demonstrate it is willing to properly hold banks to account for meeting these.”

James Bardrick, head of the UK operations of US banking group Citi, countered the critics and said the process had been useful for his bank, which was one of the 10 assessed.

Bardrick, who sits on the board of the BSB, said it had helped the management understand if their messages from the top were filtering through the organisation.

The founder members of the BSB are Barclays, HSBC, Lloyds Banking Group, Nationwide Building Society, Royal Bank of Scotland, Santander and Standard Chartered. Three others – Citi, Morgan Stanley and high street bank Metro – have seats on the board.