This is the point at which I have to wrap up and go for lunch I’m afraid. Here is a link to the live player on the Commons website in case the committee keeps going for a while.
To recap some of the most important points which will provide tomorrow’s headlines:
* Diamond said that the “period of remorse and apology” for banks needs to be over and the City should be allowed to move on.
* He said banks should be “allowed to fail” and that taxpayer-funded bailouts were unacceptable.
* He said he was committed to being responsible on bonuses, though bonuses at Barclays have not yet been set and therefore he couldn’t possibly comment on this year’s round.
* He defended Barclays shareholders from the suggestion that they are “uninformed”, given that they aren’t given a chance to discuss bonus payments before they are paid.
* He claimed not to know how many Barclays subsidiaries are offshore (although Chuka Umunna suggested it was over 300). Nor did he know how much of the tax paid by the bank was via its payroll.
* He reminded MPs that there was an inherent contradiction between being asked to behave responsibly – while being asked to lend more and more by politicians.
12.15: Diamond is asked by Andrew Tyrie whether matters would improve if executives had more skin in the game via unlimited liabilities. Unsurprisingly, this prospect is not very tantalising to the Barclays chief executive.
He cites the example of Stephen Hester, the highly-regarded new head of RBS. Would he have taken that job if he had unlimited liabilities? Ditto the new chief executive of Lloyds Banking Group, Antonio Horta-Osorio.
12.09: Andrea Leadsom, the MP who used to work for BZW, says Diamond has been talking in “fantasy” speak.
The idea that banks will leave Britain is nonsense, she says. “You seem to argue the status quo for its own stake,” she says. “You are in denial about the extent of help you received from governments…”
Leadsom is also not sure she believes Diamond’s claims about consumer satisfaction at Barclays and its strong lending to SMEs.
She also condemns the way in which remuneration is “upside only” because there is no downside in terms of directors’ liabilities – which are no longer unlimited.
Diamond replies that BZW was a rather feeble little bank which was “trampled” by the competition. It’s not clear if the MP was working there at this time.
12.06: “They throw all banks as bad,” says Diamond, complaining that HSBC and Barclays never put their organisations at risk – but were tarred with the same brush as those institutions which failed, or nearly failed. It’s hard not to sympathise on this specific point. He doesn’t deserve the Fred Goodwin treatment, one might say.
12.05: Diamond says 60,000 employees – “it’s really amazing” – do community work. “We give awards each year.” Incidentally he is said to be the person who got Barclays to put up the £20m to sponsor Boris Johnson’s bike hire scheme in London.
12.02: MPs are pressing their guests over figures which seem to suggest that staff in the retail bank only get 6 per cent of the bonuses – with the other 94 per cent going to the investment bankers and so on. The two Barclays execs are fudging the issue, neither confirming nor denying the data.
12.00: The ever-spiky Andrew Tyrie, committee chairman, says Barclays shareholders are “interested, clever and uninformed” – given they don’t know what bonuses are being proposed until after the event.
“They are half-asleep,” he suggests.
11.59: He wants “as much restraint as possible” but only “in the context of the other issues”. That isn’t restraint in the full sense of the word, I suspect.
Michael Fallon points out that Diamond got a £6.5m bonus in 2007 – did the Labour government ask him to forgo any of it? No. Did it subsequently ask him to forgo any remuneration? No. Fallon is being a little party political, as Tyrie dryly hints: “Can we be a bit less partisan?”
11.56: We’ve been going for nearly two hours now. This live blog has surpassed 4,000 words. I suspect the end is now in sight – surely Diamond can’t talk much longer without dropping?
He’s now saying he hoped today was an opportunity to explain his position. Maybe – but the gulf between the Square Mile and the Palace of Westminster remains as wide as ever.
11.54: He’s now talking about Project Merlin. And he’s emphasising Barclays’ desire to serve small business customers.
Meanwhile Antony Jenkins has some strong figures for the number of new accounts opened in recent years. Perhaps unsurprisingly, he doesn’t have the equivalent figures for the number of accounts closed.
11.48: Diamond holding firm: It’s a very polished, if not glittering, performance. (Apologies for the precious gem puns).
“We have to balance the responsibility we have and the recognition of the environment we operate in…the system needs to be safer and sounder in terms of how compensation works, but it’s in the interests of everyone in the country that we shift growth to the private sector….I don’t agree that I can isolate bonuses and assume that would have no consequences on the rest of the business.”
Diamond is asked if Barclays is paying £2bn-plus of bonuses with about £8m for him. I imagine he will say that this is speculation and the decision hasn’t yet been taken.
Yes, he is. “Remuneration board will meet over the next couple of weeks”, etc.
11.45: Andrew Love, a Labour MP, wants to talk about Project Merlin. For the uninitiated, this is the recent attempt by bankers – led by John Varley, Diamond’s predecessor – to forge a bonus compromise with the government. Its progress has been sticky, by all accounts, in recent weeks.
11.44: Mudie is citing a report (by Which? I believe) suggesting that very few Barclays customers would recommend the bank to their friends. Jenkins is now waffling about wanting to improve customer service – you wouldn’t expect him to say anything to the contrary.
11.41: Mudie has asked why Barclays can’t be more open about its payments. Diamond says it depends on the G20 reaching agreement – it can’t be done “alone”.
“Don’t wait for Europe – do it yourself,” says Mudie, in the tone of a kind uncle.
11.36: He’s gone back to the point, which is that banking is a competitive international business. “I don’t think it’s uniquely this industry,” he argues. Really? How many other ones pay massive bonuses as a matter of course?
11.34: Diamond says he is always referred to as “American investment banker”. He says he grew up in a small town, his great grandparents emigrated from Ireland (don’t Americans always claim that?) and his parents were schoolteachers.
If he wanted a new shirt or bicycle he always had to earn the money himself, he says. Homespun stuff! “You’ve got tears coming down my cheek,” intones Mudie, with heavy irony.
11.32: George Mudie MP (pictured) is trying to put the same point in a less “friendly” way. Why can’t Barclays motivate people without paying huge bonuses, he asks. It leaves teachers and nurses “baffled”, he points out. “Why do you have to pay these obscene bonuses to these self-styled masters of the universe when you’re paying them a very decent remuneration in the first place?” Perhaps Diamond’s motivational skills are lacking, he gently suggests.
11.28: “Would you feel the same way if it was a US institution with people located here?” says Diamond. He’s pointing out that a large number of FTSE 250 companies have overseas operations – and that a large portion of Tesco’s growth has been in countries such as China.
“Why would the United Kingdom not be proud to have one of the world’s best investment banks located here?” Is that an implicit threat to leave or am I just being paranoid? Thurso’s reply suggests that he read the comments in the same way.
11.25: Thurso is gently asking why bankers get bonuses – when doctors and nurses do not – given that they are professionals who would probably work quite hard on a salary alone, like most other people.
Diamond says: “We’re competing with Goldman Sachs, with Deutsche Bank, with JP Morgan.” That, in a nutshell, is the dilemma.
11.24: Incidentally you can watch this live on parliament’s website if you want. Here is a link to the site.
11.21: Diamond was asked by Thurso about bonuses; he is trying to get across the message that staff all over Barclays pick up an annual award, and not just the Gordon Gekko-style “masters of the universe” sitting in towers in Canary Wharf or New York. Instead he is citing call centre workers in Bangladesh and so on – in a bid for our sympathies. Typical workers on around £25,000 a year in Britain get bonuses of £1-2,000, says Diamond’s sidekick (Antony Jenkins, Chief Executive Global Retail Banking).
I suspect the MPs may be more interested in the handful of big-earners at the top of the Barclays pyramid, picking up bonuses of £1m or more.
11.20: Bearded Lib Dem MP John Thurso says there has been a “civil war” between politicians and banks over bonuses which hasn’t been very helpful. But has there? If neither Cameron nor Osborne has asked Diamond to show restraint doesn’t that suggest otherwise?
11.19: Diamond repeats his line that he wants to put remorse behind him – and move on to questions of greater lending and so on. Of course he does.
I struggled earlier to recognise Andrea Leadsom, part of the new Tory intake, apologies. My colleague James Kirkup at the Telegraph points out that she used to work for….BZW, precursor of BarCap.
11.16: “If you are offered a bonus this year will you accept no bonus this year,” says Mann.
Diamond says he has already given up a bonus last year. “Today I have not been awarded a bonus,” he says, not answering the question – which was of course hypothetical.
“I’ll make that decision with my family as I did last year,” the CEO continues….”You’re not a big fan of Barclays are you?”
“I’m a big fan of getting answers from you,” says the MP.
Diamond tries to be diplomatic. “I understand you’re coming from a different direction.”
11.12: John Mann – Labour’s own “Everymann” – is having a go at Diamond. First he asks if senior ministers have asked Diamond to show bonus restraint with his own package. “No,” is the fascinating answer.
Then former union official Mann asks the relevance of the biblical expression that it is harder for a camel to pass through the eye of a needle than a rich man enter heaven. Diamond looks non-plussed. Calm down, Mann.
Diamond replies on his bonus, saying it’s a matter for the board (or rather the remuneration committee) and not him.
11.11: Andrew Tyrie picks up Umunna’s point about how much of Barclays’ tax is paid via the payroll – ie through employees. He gets Diamond to agree to provide this information to the committee.
11.10: A brief moment of contrition, or faux-contrition depending on your level of cynicism. Diamond admits that he has made “some mistakes”.
11.07: Diamond is being asked about his comments that bonuses are not taken lightly. “Do you understand how toxic this issue is in the real world?”
“We are sensitive, we are listening, and one of the reasons I was looking forward to today was to have an opportunity to put some balance and some understanding….we’ve done a very poor job over the years in explaining how the compensation process is integrated in the other aspects…how investment banks contribute to society…and I certainly pledge to do more in that regard.”
Not exactly showing much humility.
11.06: Hosie claiming that “the taxpayers own this”. I’m not quite sure what he means, given that the state doesn’t have a stake in Barclays. Although if you were being really pedantic you could argue that the shareholders, who are mostly City institutions, pay tax and are therefore taxpayers. Complex.
11.02: In 2007 you paid £8.4bn, £9.95bn in 2009, says Hosie. The figure should be similar this year, he adds. “Why are shareholders being treated like this?” says the MP.
Diamond acknowledges the sensitivity of the bonus debate. “I am committed as chief executive to being responsible and showing any restraint I can,” he argues. No bonus decision is taken lightly, he says. It’s all about maintaining the best business possible.
“I could decide at the end of the year not to pay anyone,” he says, presumably sarcastically. BZW – the predecessor to Barclays Capital – didn’t pay big bonuses but had a lot of problems, he argues. “I am so proud of Barclays Capital, it is the only global investment bank that has been successful that has been built from scratch…today it is in the top 3 in the world in fixed income, in commodities,” etc etc etc
11.00: Now it is the turn of Stewart Hosie, an SNP member of parliament for Dundee East. He is asking about staff remuneration. I think I know where this line of questioning might go; ie, are shopfloor workers getting the same pay rises as directors? Just guessing here.
10.58: Diamond is reminding the world that he wasn’t CEO of Barclays at the time, only head of Barclays Capital. He’s talking the committee through the timings of the deals. He says that buying Lehman would have only happened if $60bn of dodgy assets (including toxic real estate loans) were taken out of the deal and if Barclays received other commitments from the government. “We were very careful of our risks…ring-fencing away from Barclays the assets that were troublesome. That’s a much different perspective,” he points out.
10.56: Chuka reminds Diamond that he tried to buy Lehmans before it went under. Also that Barclays tried to buy ABN Amro – only to be thwarted by RBS. Did it have a lucky escape given that the deal helped to sink Royal Bank of Scotland?
10.54: The Streatham MP asks if Barclays will reduce its offshore companies to transact business. “I’m happy to look into the numbers you gave,” says Diamond. “It would be inappropriate to discuss something I don’t know.” Ouch.
“I can assure you the bank is not evading taxes,” says Diamond. Chuka – I told you he’s not stupid – said he wasn’t asking about evasion (illegal), he was asking about avoidance (legal) on a “grand scale”. Awkward.
10.53: Umunna says, if Barclays wasn’t involved in tax avoidance, why did it injunct the Guardian when it tried to discuss the issue. Diamond says: “Our injunction was because someone stole confidential client information, which is against the law.”
“We paid £2bn of tax last year to HMRC and over the last six years we paid about £12.5bn…I think that’s the number you’re looking for,” says Diamond.
Umanna says most of this could be paid by employees, ie through payroll taxes. Diamond doesn’t know if this is the case or not, he maintains.
10.50: Chuka Umunna is asking how many Barclays subsidiaries are incorporated in the Isle of Man. Diamond says he doesn’t know. Umunna says there were 30 in that jurisdiction. He asks about Jersey. “The number is 38,” says Chuka. Ditto Cayman Islands – 181. Ummana points out: “All these are well known tax havens…a cursory reading of your group returns suggests you have over 300 companies operating in tax jurisdictions around the world.”
Chuka Umunna is a young Labour MP and is nobody’s fool. He is a socialist (correction – he tells me he is a ‘social democrat’) but he is also a former corporate lawyer (Herbert Smith) and knows what he’s talking about. Should Diamond be embarrassed that he couldn’t answer those simple questions?
10.49: He has been asked about Protium Finance, which was a structured device for Barclays to sell off some “stick”, illiquid assets over a year ago. It is no longer owned by the bank, he points out.
10.45: Diamond is saying that he never put the system at risk. “We never took a single penny from any taxpayer around the world,” he says. Ms Leadsom points out that this is not true. Although Barclays did not take an equity injection – unlike RBS and Lloyds – it did benefit from other broader attempts to rescue the system.
10.40: An MP in a red leather jacket (Andrea Leadsom) says that bank chiefs didn’t take bonuses for a year or so. But where is their current accountability?
Barclays now carries 10 per cent core equity, up from 5 per cent, replies Diamond.
Leadsom says this wasn’t quite what she meant; why has no one gone to prison or been banned from holding a financial post again, she asks?
10.38: “Will you resign if you don’t substantially increase lending this year?” demands Ruffley in a blatant pitch for our populist of the day award. Don’t hold your breath as Diamond works his way through the reply.
Diamond is again trying to explain that a bank shouldn’t lend without examining the creditworthiness of the borrower. Basic stuff. If anything you could argue that this is where many of the British banks went wrong in the run-up to the crash. He is calling Ruffley “David” in an attempt to soothe the, er, ruffled Tory MP.
10.36: He says 85 per cent of small business loans are being approved, “slightly higher” than before the crisis. “The best thing that Barclays can do for the UK economy is to have a strong bank with strong risk management,” he says.
The man has a point. If Barclays lent to every Tom, Dick and Harry – as some politicians blithely maintain – then it wouldn’t make a profit and would go under. Ditto the part-nationalised banks.
10.35: He won’t be drawn on how much of an increase in lending Barclays will provide this year. Perhaps unsurprisingly at this point. George Parker, our political editor, had the scoop this morning that the main banks may have to go through a weird system whereby they each put their lending promises into a secret “black box” so they can’t see each other’s pledge – to maintain commercial confidentiality.
10.33: Diamond is pointing out that “we like to lend…it is our business”. Yes, up to a point. Except Barclays, like other big banks, also do an awful lot of other stuff, involving speculation (proprietary trading), advisory services, M&A advice and so on. They don’t just lend.
Meanwhile Ruffley is expressing horror that Diamond hasn’t read the FT this morning. “It’s a good read,” he says. Your cheque is in the post, Mr Ruffley.
10.32: David Ruffley is now asking if Diamond feels a sense of social obligation. Interesting how aggressive the MP is being – given that he is a Tory. In the old days they tended to be rather more pro-banking. We thought the attack dog lines would come more from Labour MPs such as John Mann.
10.27: Michael Fallon, Tory MP, has tried to stop Diamond from waffling: “Time is short,” he says curtly. David Ruffley MP has quoted the Bank of England saying that because Barclays is too big to fail it is more credit-worthy and can therefore borrow more cheaply – worth £100bn a year to the big five banks. “Are you grateful to the British taxpayer for subsidising you in this way”. Diamond says he is very grateful to governments around the world for the action they took. Ruffley won’t be deterred from his specific question. He tries again. Diamond is now trying to ask Ruffley a question. “I ask the questions, you provide the answers,” says Ruffley. Pure theatre.
“We are thankful to everyone,” says Diamond. “The British taxpayer?” says Ruffley. Diamond at last confirms it.
10.26: Diamond has got to the heart of the issue. “There was a period of remorse and apology for banks, that period needs to be over. We need banks to be able to take risk, working with the private sector in the UK.” He has a very good point: for the last two years politicians have been torn between urging banks to lend more – but also to be more risk-averse. The two seem mutually incompatible.
10.24: Now he is discussing Barclays’ history, founded in 1690, 320 years ago. “This is the place we want to succeed.” The room is absolutely packed with journalists and other observers (including Lord Myners, former City minister). Many are standing.
10:21: Diamond says it is not appropriate to talk about “casinos” in relation to Barclays Capital, the investment banking wing of the bank – which he used to head up. He’s giving the earthy example of how BC was able to help a farmer hedge against the price of fertiliser, EU subsidies and so on. But – dare I say it – in this example the farmer is still taking a bet.
10.18: Diamond is being pressed over potential separation of retail and “casino” (ie investment) banking. “The financial model is stronger as a result of the integrated business model,” he insists. “It gives us a greater capacity for lending”. It’s positive for customers and for financial stability, he insists. You might expect him to say that. The issue of a Glass-Steagall type separation is currently being considered in the UK by John Vickers and his “independent commission on banking” in a one-year review.
10.15: “So the shareholders don’t know what you’ll be paying and the structure of the bonus scheme you will announce?” asks Tyrie, rather incredulously. Diamond is playing for time, saying that the system is line with internationally recognised systems etc. But Tyrie continues: “The shareholders won’t know until the payments are determined”. It’s an intriguing line of questioning.
10.13: Tyrie (pictured) is pressing Diamond on whether shareholders have been pressing the Barclays board over bonus payments for this year. (I didn’t think it would take long for the MPs to get on to the subject of bonuses). Diamond says that the banks owners are “continuously involved” with how the business is run. “They openly approve the remuneration report,” he says. Tyrie just wants to know if a discussion is taking place. Diamond says compensation is in line with G20, FSA, etc.
10.11: Diamond insists that “banks should be allowed to fail”. Interesting. “It’s not okay for taxpayers to have to bail out banks.” Was he saying this two years ago when many more financial groups would have failed without states stepping in?
10.10: Diamond has insisted that Barclays has strong risk management models and is a strong business. He seems surprised that MPs may have doubts about this given the recent credit crunch. Andrew Tyrie says: “A number of banks have gone down. It’s not surprising we’re discussing it is it?”
10.09: Diamond is rather more subdued that you might expect, his voice is almost mumbling. I’d imagined that he might be more gung-ho. He’s wearing a bright red tie but no braces as far as I can work out.
Diamond is a renowned investment banker. He‘s an American – although he also has a UK passport – having been born in Massachusetts in the summer of 1951 as one of seven children. He worked at Credit Suisse First Boston and Morgan Stanley before joining Barclays in 1996.
As a youth, according to Wikipedia, he helped Terry Gilliam cut out figures from Victorian photographs for the Monty Python animations; this I don’t believe for a second – sorry Wikipedia pranksters.
I think what we’re looking forward to this morning is the contrast between the slick Diamond and his Parliamentary foes. While Bob appears the archetype of the swish American banker, with his perfect white teeth and slick manner, he is up against some rather different characters.
Just as Diamond suits his surname – all smooth edges, dazzling surfaces and high price tag – so too does John Mann, Labour MP and committee member who is determined to take on the new Barclays chief.
It is Everymann, sorry, Mr Mann, who has recently called on all bankers to forego their bonuses this year. The plain-speaking former union official is MP for Bassetlaw, a constituency just south of Doncaster. That’s up north, for our London-centric readers. He has little sympathy, to say the least, with the pay culture of the Square Mile.
Here is a clip of Mann in action:
Perhaps more of a threat to Mr Diamond is Andrew Tyrie, chair of the committee, whose ultra-dry manner is something of a contrast. Mr Tyrie, who prefers the rapier to the bludgeon, has already proved himself a formidable operator since taking over the chairmanship last summer.
A former chief economist for the EBRD – who once worked as a Treasury adviser to John Major and Nigel Lawson – he is a highly cerebral figure who is not easily cowed. While comfortable with capitalism, he may have little sympathy for Diamond’s bulging pay packets of the past. As he recently said: “Bonuses should be targeted to reward success and not be handed out with the rations.” Let’s see what he has to say to the new Barclays chief executive.
I can clearly remember the atmosphere that day, the crowd of paparazzi outside Portcullis House, a throng of protesters and union members with placards. It was pretty febrile. Governments around the world had just spent hundreds of billions of pounds rescuing the financial system from collapse.
Fast-forward two years and life is much more peaceful. The credit crunch has more or less passed, the FTSE 100 is back to its highs before the collapse of Lehman Brothers. And we are heading for a bonus round in London which could easily surpass £7bn or so.
But the issue of banking greed is not entirely dead and buried. News headlines in the past few weeks have been dominated by the issue of bonuses and whether banks should show restraint given that lending is still constrained – and as a show of contrition for the credit crunch.
Nick Clegg and Vince Cable, the most high-profile Liberal Democrats, are among ministers to have recently demanded restraint from banks or else. Except that a] it is not clear what they will do to punish big bonuses and b] the bonus season looks likely to be slightly lower than last year anyhow.
Even so, this morning’s session looks likely to be an entertaining clash, given the contrasting egos involved. Bob Diamond, the new chief executive of Barclays, is pretty far removed from the old-fashioned image of a staid British banker. With a personal wealth estimated at close to £100m, the 59-year old is rather a controversial character. And he is supposedly set to pick up a fresh bonus of £8m this year – if newspaper reports are to be believed.
As head of Barclays Capital, the investment banking arm of Barclays, he was always paid vastly more than the then chief executive of the bank, John Varley. And he’s already been the subject of political angst, having been described by Lord Mandelson – who was supposedly “relaxed” about the super-rich – as the “unacceptable face of banking”.
According to my notes, Mandelson, former deputy prime minister, once described Bob as having made his fortune only by “deal-making and shuffling paper around”. Similarly, Vince Cable, now business secretary, has accused him of “trying to build the biggest investment bank in the world on the back of the taxpayer.” It would be fair to say that Barclays has courted controversy by appointing him to its top job.
9.50am: Welcome to our live blog as Bob Diamond, pin-up idol for the bank bonus generation, arrives in Westminster for a grilling by MPs.
We were starting to get rather nostalgic as it has been some time since the last public bust-up between bank chiefs and the Treasury select committee.
It was February 2009 that the chief executives and chairmen were forced to grovel to the committee – saying they were “profoundly sorry” – in the 21st century equivalent of the public stocks. Back then the chairman was silver-haired Scotsman John McFall, a Labour MP who is now in the House of Lords.
Here is a clip of him in action