Barclays to link pay to capital strength: sources

Barclays Plc is linking the pay of over 1,000 senior bankers to the British bank's capital strength under pay awards to be unveiled this week, people familar with the matter said on Sunday.    

Staff at the bank were told details of their pay deals on Friday and it includes a deferred element that will only pay out in cash if the bank's core Tier 1 capital adequacy ratio stays above 7%, the sources said.             

The ratio is comfortably above that trigger level, at around 10%, making it unlikely staff will miss out unless there is another shock to the industry.                                           

Barclays considered paying staff with contingent convertible bond instruments, dubbed 'Cocos', which would convert into equity if the bank hit trouble and its capital ratio fell below a certain level.  

But Cocos are not yet widely in issue and Barclays will instead claw back up to half of the deferred bonus if the capital adequacy ratio falls. The other half of the deferred award -- over three years -- will be in cash.                                           

The affected staff will include hundreds of managing directors and other senior bankers at Barclays Capital investment bank. On average about 60% of each bonus is deferred, depending on seniority.                                           

Reuters first reported that Barclays was considering using Coco-type instruments in December.                                           

Britain's industry regulator has approved the use of the innovative clawback tool.                                           

Details will be confirmed on Tuesday, when Barclays is expected to report pretax profits of £  5.7 billion  for 2010, up 24% from £  4.6 billion in 2009, according to the average of 26 analysts polled by Reuters Estimates.                                           

But revenue at Barclays Capital is expected to have fallen to about £13 billion in 2010 from a record £17.9 billion in 2009, following a slowdown in investment banking activity. 

Bonuses at BarCap will be down about 15% from last year's pool of about £2.7 billion, Bloomberg reported.    

Barclays declined to comment.                                           

BarCap bumped up fixed salaries for staff earlier this year, and last week the main UK banks promised to reduce bonuses as part of a deal on pay and lending with the UK government.             

BarCap's total compensation could remain near to last year and its key compensationrevenue ratio may rise, potentially to over 40%, partly due to deferred pay from 2009 showing up in the 2010 accounts.                                           

New chief executive Bob Diamond is expected to say on Tuesday he may shed or scale back businesses that fail to offer an attractive return as part of an increased focus on improving profitability as tougher regulations bite.                                           

There is intense scrutiny on the pay of Diamond after reports he is in line for a bonus of about £9 million, but that might not be disclosed until the bank's annual report is released in early March.