Barclays cuts the bonus pool for staff as profits take a big leap

Banking giant Barclays has reduced the bonuses paid to its staff, despite pre-tax profits rising by 32 per cent to £6.1bn in 2010.

It announced a new compensation system following its Project Merlin deal with the Government which will see it pay 7 per cent less in performance awards than last year.

At its investment banking arm Barclays Capital, which saw pre-tax profits excluding own credit increase by 2 per cent to £4.4bn, the bonus pool will be 12 per cent lower than last year.

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Despite the reduction in the bonus pool, overall remuneration to staff increased 20 per cent to £11.9bn. Total performance-related pay, including bonuses which had been deferred from previous years, increased by 25 per cent to £3.5bn.

Barclays also announced a raft of new measures which will see senior staff bonuses deferred over three years and will only be paid if the bank meets its capital requirements under the Basel agreement.

The number of staff who will see 60 per cent of their pay deferred has also been significantly expanded beyond the requirements of the FSA’s remuneration code, the company added.

Chief executive Bob Diamond is due to receive an expected package of more than £9m in pay and bonuses but details are unlikely to be revealed until Barclays releases its annual report next month.

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Barclays said its decision to reduce 2010 bonuses was influenced by its recent Project Merlin agreement with the Government which saw the big four banks agree to pay less in bonuses than last year and lend more to small businesses.

Mr Diamond said: “We are committed to demonstrating that we are both responsible in our compensation decisions and practices and that we take our regulatory obligations and UK Government commitments seriously.

“In particular, our overall performance awards in 2010 have been directly influenced by the commitments that we have made under Project Merlin. In reaching our final decisions, we have had to balance carefully our obligations with our need to ensure that our decisions are commercial in a highly competitive global environment.”

The results revealed that Barclays wrote off nearly £1.7bn in 2010 as a result of consumers defaulting on their credit card debt.

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Barclays’ UK retail banking business enjoyed a strong year as it made the most of being one of only a few lenders that remained active in the mortgage market.

Outstanding mortgage balances increased by 16 per cent during the year to £101.2bn, through a combination of the acquisition of Standard Life Bank and high levels of new mortgage lending.

Barclays employs around 3,000 staff across Yorkshire.