Pay row banker new head of Barclays

Bob Diamond will take over from chief executive John Varley in March

after a 14-year spell with Barclays that has seen him turn its investment banking arm from scratch into a business so large it generates more than 80 per cent of the bank's total profits.

The 59-year-old, one of the world's richest bankers, will be paid a 1.35m annual salary, up from the current 250,000, and stands to receive potential bonuses worth another 10m.

In a day of upheaval in the banking sector, HSBC executive chairman Stephen Green also announced plans to step down in favour of a role in David Cameron's government. Mr Green, who has been chairman since 2005, will replace Lord Davies, the former Standard Chartered boss, as trade minister.

Mr Diamond said he was "honoured" to take on the new role, but the move is likely to enrage some politicians and union leaders.

Many consider Mr Diamond – with an estimated worth of 95m – to be the epitome of the excessive bonus culture.

Although he waived his bonus last year after widespread criticism of bankers, he received 26m for his shares in Barclays Global Investors, the bank's fund management business, when it was sold to America's BlackRock.

Mr Diamond was criticised in April by politicians including Lord Mandelson and Vince Cable when it was claimed he received 63m under a reward scheme. In his new role, Mr Diamond will receive an annual bonus of 3.375m on top of his salary, as well as a long-term performance-based incentive worth up to 6.75m.

Barclays said the payments were benchmarked against a peer group of other global banks and financial services firms.

Paul Kenny, general secretary of the GMB union, said the appointment was "insulting".

He said: "These are the bankers who caused the recession sticking two fingers up at the taxpayers who rescued them."

Mr Diamond, who previously missed out on the role to Mr Varley in 2004, is expected to have relocation costs covered as he moves to London from New York, where he has spent the past two years integrating the acquisition of Lehman Brothers into Barclays Capital.

Under his stewardship, the investment banking division has been the powerhouse of profits growth at Barclays, with the bank reporting a 44 per cent hike in half-yearly profits last month.

City analysts welcomed Mr Diamond's appointment and said the move

showed the bank would not bow to Government pressure.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: "His leadership in acquiring Lehman Brothers' assets at the height of the global banking crisis was both brave and, with hindsight, positive, with the strengthened investment bank leading the group's subsequent recovery."