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Does the Treasury back Barclays on Merlin?

Ben Chu

The Treasury has finally got back to me on Merlin.

First here’s a background recap. Barclay’s says that its “performance costs”, payments for its staff, for 2010 were £3.5bn. This was an increase of £700m on its performance costs in 2009 of £2.8bn. Yet Barclays says that its “performance awards” fell from £3.7bn in 2009 to £3.4bn.

So what’s the difference between “performance costs” and “performance awards”?

Barclays says “performance costs” refers to:

“The charge recognised in 2010 for accounting purposes for cash and share based bonuses and incentive payments. This would include amounts relating to 2010 bonuses and incentive payments. This would include amounts relating to 2010 bonuses and long-term awards  made in previous years.”

Performance awards refers to:

“Cash and share based bonuses for 2010 and long-term awards made now but but vesting in future years”

So Barclays, when calculating the “size” of its 2010 bonus pool, did not include bonuses that were awarded in previous years, even though the bankers received them in 2010.

I suggested this looked dodgy since the Merlin agreement between the Treasury and the banks said:

“The four banks confirm that the aggregate 2010 bonus pool (including deferrals) for their UK-based staff will be lower than that of 2009.”

Barclays told me that “including deferrals” refers only to bonuses vesting after 2010, not those deferred from previous years.

I asked the Treasury if they were happy with that interpretation of the Merlin agreement.

Here’s their (rather belated) response:

“What the banks publish is a matter for them. The commitment they made, which the Government welcomed, was for the 2010 bonus pool to be smaller than the 2009 bonus pool and for remuneration committees to write to the FSA to confirm that. The 2010 bonus pool is understood to be the total bonuses awarded in relation to the year 2010, including amounts deferred to future years (as required by the FSA’s code of practice on remuneration). But…it is for the banks to show that this total is lower than 2009 in their letter to the FSA.”

Not, I would suggest, an unequivocal message of support for Barclays’ interpretation of Merlin. But then, if the Treasury has an objection, they should make it clear. Otherwise, we have to conclude that it is satisfied that Barclays have lived up to their side of the bargain.

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  • voiceofconscience

    Reading between the lines the Treasury view is “we don’t have any say in what Banks do, as long as the Banks give us a letter that keeps us happy, and allows us to tell Ministers what they want to hear, we don’t really care”.

  • bill439

    How many people know that the Treasury, that is, the government, allows the banks to create our national currency, our legal tender?

    They do so when they lend money and charge interest on it. The money they create is not real money but digital entries, debts, in borrowers’ accounts.

    Should our currency (97% of it) be brought into existence by private banks to make profit? Most people would say “No” if they knew about it.


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