Barclays enjoys big profits but Brown asks bankers not to accept bonuses

10 February 2009 / by Rachael Stiles
Barclays has announced higher than expected profits of £6.1billion in 2008 and its assets have grown to more than £2trillion, but Brown is urging bankers not to accept their bonuses.

The bank's shares rose 11 per cent after announcing profits above the levels it predicted several weeks ago.

While it has managed to increase its balance sheet so that it exceeds the output of the entire UK economy, bankers at Barclays and other firms are being urged not to accept their bonuses, even if they are contractually entitled to them.

The controversial issue of bonuses has caused outrage amongst ministers and the public, who do not believe that taxpayers' money being used to prop up the banking system should also be used to reward its employees for failure.

Gordon Brown has said that the financial industry should not condone "irresponsible" behaviour and "risk taking", and said that there should be "no rewards for failure".

He is urging those banks which have benefitted from last year's £37billion Government bail-out scheme not to accept the bonuses. RBS, which received an injection of taxpayers' cash, is reported to be paying out £1billion in bonuses.

Tory leader David Cameron has accused the Government as being "completely asleep on the job" while banks were lending to the hilt and then rewarding their executives while accepting support from the Government.

Treasury minister Yvette Cooper said that the contractual or legal obligations on banks to pay bonuses to their executives as the banks make huge losses as the economy slows should be challenged.

She told the BBC that "We have made very clear that as major shareholders in these banks we won't accept bonuses for failure." These "need to be curtailed", she said, and praised President Obama's approach in the US of banning future cash bonuses for executive bankers.

Barclays has not yet had to approach the Government for help, choosing instead to accept a cash injection from its Middle Eastern investors last year, but it said yesterday that it will slash the bonuses it pays to its directors. Bonuses will be cut in half and staff will have to accept part-payment in shares.

RBS, in which the Government holds a 68 per cent stake, has attracted the most criticism, announcing huge losses for last year whilst insisting that it has contractual obligations to its executives, despite the fact that the terms of the bail-out stipulate that board directors of partly state-owned banks must not receive cash bonuses.

David Cameron believes that, "As the principal shareholder, "the Government is "able to say what is and what is not acceptable." when it comes to bonuses.

"It is outrageous for taxpayers to put £20bn into banks to see a billion of that used to pay out bonuses," he said.

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