Barclays announce further changes and Lloyds boss faces grilling from MPs

Bank bosses face a grilling from parliamentarians on the banking standards commission this week as the industry braces for another reputational hit from the Libor-rigging scandal and amid further management upheaval at Barclays.

António Horta-Osório, chief executive of bailed-out Lloyds Banking Group, is expected to be questioned on Monday about whether he should pocket a potential £2.5m bonus after Friday’s news that Barclays boss Antony Jenkins has waived his mooted £1m bonus, reports The Guardian.

Barclays announced management changes on Sunday with finance director Chris Lucas and general counsel Mark Harding preparing to retire – the fifth set of management changes at the top of the bank since the £290m Libor fine that led to Jenkins’ promotion and the resignation of his predecessor Bob Diamond.

Stephen Hester, the chief executive of 83%-state-owned Royal Bank of Scotland, had already declined his potential payment for 2012 following an IT crisis and as the bank prepares to pay out up to £500m to settle allegations of manipulating Libor.

Lloyds is yet to reveal what bonus Horta-Osório – who presided over a 77% rise in Lloyds’ share price in 2012 and declined a bonus in 2011 – will receive in addition to his £1.1m salary. The bank insists no decision on the topic has been made.

However, the subject is likely to be pounced on by the banking standards commission, with a member of the panel telling the Guardian that the bonuses of Horta-Osório, as well as HSBC chief executive Stuart Gulliver, would be a “natural thing to come up”. Another source close to the inquiry added: “It is likely that remuneration will be raised at one, if not all of, [this week’s] sessions.”

Unlike Lloyds, HSBC did not require a taxpayer bailout during the financial crisis. However, last year it was forced to pay a £1.2bn fine to US regulators to settle allegations that it had allowed itself to be used to launder billions of dollars for drug barons and potential terrorists for nearly a decade until 2010.

Gulliver was awarded a £2.1m bonus on top of his £1.25m salary in 2011 – his first year as HSBC’s chief executive – a pay packet that was swollen to £7.2m by the bank’s long-term incentive scheme. He and his counterparts from Lloyds and Barclays will appear before the parliamentary commission on banking standards, which was established last summer in the wake of the Libor-rigging scandal.

The inability of the banking sector to avoid a series of scandals has ensured that the issue of banker bonuses has remained toxic. When the banking standards commission took evidence from the chairman of Barclays’ remuneration committee, Sir John Sunderland, last week the members described his defence of the generous bonuses awarded to Diamond as “unrepentant” and “absolutely extraordinary”.

Last week the chancellor George Osborne indicated to RBS that its bankers must give up their bonuses to pay international fines imposed for the Libor-rigging scandal and on Monday he will unveil measures intended to cushion high street banks from any wrongdoing in their investment banking businesses.

But the chancellor is not intending to reinstate a crucial part of the Vickers reforms that would restrict the so-called leverage cap to 4%, enabling a bank to lend 25 times more than its capital. He has watered that down to a 3% cap – which would allow banks to lend out 33 times.

Even so, the chancellor wants to portray 2013 as the “year we reset our banking system” and intends to tell an audience in Bournemouth that he will have a reserve power to break-up banks if they fail to implement the ringfence between their high street banking arms and investment banking businesses in line with the Vickers reforms. This so-called “electrification” of the ringfence was suggested during pre-legislative scrutiny by the parliamentary commission on banking standards, chaired by Conservative MP Andrew Tyrie.

Lord Oakeshott, a former Treasury spokesman for the Liberal Democrats in the Lords, said the scandals at Barclays showed the ringfence should be “sky high with 10,000 volts” running through it.

But bankers immediately warned this would have an impact on lending. Anthony Browne, chief executive of the British Bankers’ Association, said: “This will create uncertainty for investors, making it more difficult for banks to raise capital, which will ultimately mean that banks will have less money to lend to businesses.”

The chancellor will blame Labour’s previous system of regulation, which he is tearing up, for the crisis, saying: “The fire alarm was ringing but no-one was listening. And when the crisis hit, the fire was then so great that the whole economy was sacrificed to put it out … The British people need to know that lessons have been learned. And they have.”