Bob Diamond will stamp his authority on Barclays next month, when the incoming chief executive announces a radical overhaul of the way it pays its top bankers as part of a broader strategic review that could see the group shed staff and put increased pressure on underperforming businesses.
According to people close to the plans, Mr Diamond aims to use innovative bonds – so-called contingent convertibles, or cocos – to pay a large portion of the bonuses for more than 1,000 bankers, those ranked at managing director level and above.
Regulators around the world are introducing new rules to force banks to defer larger proportions of bonuses.
Barclays , which is set to announce the pay plan with its annual results in mid-February, has yet to secure regulatory sign-off but is understood to have already approached the UK’s Financial Services Authority. The bank declined to comment other than to say no final decision had yet been taken.
Barclays is also planning to announce a broad-based review of its operations, pinpointing underperforming units and setting strict improvement targets. Mr Diamond was likely to extend an ongoing cost-cutting exercise at Barclays Capital, the investment banking unit, across the group, bankers said. If the scale of the BarCap cuts was replicated group-wide, it would mean more than 3,000 job losses.
Another task will be rebalancing the group, which still depends on investment banking for three-quarters of its profits.
Mr Diamond is planning to reshuffle some senior management roles. Some senior bankers say he may seek a replacement in the short term for Chris Lucas, finance director, who is believed to be unwell.
Issuing a large slug of bonuses in cocos would mark a significant departure for investment banks, which have focused instead on increasing the amount of share-based and deferred pay awarded to their highest earners.
Credit Suisse is the only other bank to have signalled a desire to use cocos in its pay structure, though it has no plans to do so this year. Cocos are bonds that convert into equity in times of stress, making them appealing to regulators because they act as capital buffers and to banks because they do not dilute shareholders upfront. But investor appetite for them is unclear, a problem overcome by issuing them to staff.
Mr Diamond may face grumbling from BarCap staff who last week saw Goldman Sachs, Morgan Stanley and JPMorgan Chase set aside a combined £22 billion ($35 billion) to pay their investment bankers. Analysts expect BarCap to set aside about £5bn in pay for its investment bankers, of which slightly less than half would be in bonuses.