Star banker Todd Edgar and his team of nearly a dozen fellow commodities traders are to leave Barclays as part of a stream of cuts designed to shed overheads and put the UK bank on target to hit profit targets.
Mr Edgar – previously one of JPMorgan’s top proprietary traders – stoked the political storm over bankers’ pay in 2009 when it emerged that he and four members of his proprietary trading team had been poached by Barclays Capitalon a two-year deal worth as much as 30 million pounds.
He and his colleagues now plan to set up a hedge fund by the end of the year. People close to the situation said it had become untenable for BarCap to employ prop traders in the light of US Dodd-Frank leglislation barring banks from trading on their own account.
Bob Diamond, Barclays chief executive and the man who previously built BarCap from an also-ran investment bank into a top global institution, has spent this year trimming his ambitions as he strives to nearly double the bank’s return on equity to 13 percent by 2013.
Last month, he announced Barclays was shedding 3,000 jobs across the group, with close to half the cuts in the investment bank – or about 5 percent of BarCap’s 24,000 workforce.
About 1,400 of the jobs were eliminated in the first half of the year, Mr Diamond said. But the bank is set to begin this week on the second phase of the cuts, with redundancy announcements expected in the US and the consultation process for job losses kicking off in the UK as well.
The 2009 hiring of Mr Edgar triggered an unusual semi-public spat between Barclays and JPMorgan, with the US group complaining to the UK’s Financial Services Authority about the terms of the pay deal.
JPMorgan contacted the FSA over concerns that the package was excessively risky and would distort the market for City bankers, according to people familiar with the negotiations.
The deal was worth up to £30 million in cash and shares, incorporating a “good leaver” clause that allowed Mr Edgar and his team to leave BarCap with all their deferred compensation after two years. That period expires this month.
BarCap’s job cuts come amid a clutch of similar announcements by other banks – particularly in Europe – as institutions adjust to a weaker-than-expected economic outlook in the euro zone and the US, as well as the cost challenges of tougher regulatory capital rules. In the past month alone, eight banks – six of them European – have announced 60,000 job cuts.
Both BarCap and Mr Edgar declined to comment.