Barclays is flouting new curbs on bankers' bonuses, as it and HSBC announced a return to profits. In the face of public criticism, the two banks passionately defended the bonus system.
Three investment bankers at Barclays have been guaranteed bonuses for two years, despite the fact that new rules recommend that such deals be banned. Its investment arm, Barclays Capital, has also hired about 200 financiers and guaranteed their bonuses for a year.
This emerged as Barclays reported £2.98 billion in profits for the first half of 2009, and HSBC reported profits of £2.95 billion, news which helped to push shares on London's stock exchange up almost 2 per cent to a ten-month high. Sterling rose to its highest level against the dollar since the autumn.
However, the bonuses have sparked concern across the political spectrum that the banks are returning to their old habits, less than a year after the government spent an estimated £1.2 trillion on the bank bail-out.
Shadow chancellor George Osborne said: "Banks should watch out that they do not misuse taxpayer support - it's designed to facilitate lending, not mega pay deals. Without taxpayer support, the whole system faced failure."
Vince Cable, Liberal Democrat Treasury spokesman, said that the Financial Services Authority needed to show "real teeth" in its dealings with bankers.
But top executives at Barclays and HSBC defended extravagant bonuses. John Varley, chief executive of Barclays, drew a comparison to footballers: "There is simply no higher priority that to ensure we field the very best people. That in a sense is exactly the same as a football manager if they are going to win. Our obligation is to ensure we pay appropriately."
Stuart Gulliver, who runs the investment bank at HSBC, compared bankers to Hollywood stars.
Neither HSBC nor Barclays have directly taken funds from the taxpayer, but both have benefited from the billions of tax payer funds which have stabilised and propped up the sector.
Since the October bail-out, the government has demanded that the FSA tackle bonus culture to prevent an atmosphere that encourages risk-taking, but the City regulator does not plan to set caps on pay.
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