* Fidelity publicly criticises Barclays over bonus rise
* Barclays has said it needs to raise bonuses to keep staff
* European lawmakers to consider revamping EU bonus rule
* British banks risk tougher regulation due to pay rises
By Steve Slater and Chris Vellacott
LONDON, March 11 Barclays faces a backlash from
shareholders over its decision to raise bonuses despite a fall
in profits, with investors increasingly demanding CEO Antony
Jenkins give more money to them and less to his staff.
British banks have failed to rein in pay despite a new EU
cap, leading to a threat that politicians and regulators in both
Brussels and London might impose more curbs.
Few have drawn as much criticism as Barclays, where profits
fell by a third but staff have just won a 10 percent bigger
bonus pot to share for last year than the year before.
Jenkins said in a newspaper interview last week that he was
forced to increase bonuses after an exodus from Barclays'
investment bank in America left him fearing a "death spiral".
But the excuse seems only to have annoyed shareholders who think
he should have fought harder on their behalf.
"The bonus issue is on a collision course with shareholders
again. I have been unhappy with this for a long time," one of
the bank's institutional shareholders told Reuters on Tuesday.
"Shareholders have been long suffering, while employees sail
on unscathed. They will trot out the same arguments again, about
how if they don't pay up they will lose key staff. This is a
bluff that has never yet been called," the shareholder added.
In a rare public display of criticism, Fidelity, Barclays'
17th biggest shareholder, said it was "disappointed" the bank
was not paying shareholders more.
Chief investment officer Dominic Rossi said the bank had
landed itself in a "public relations mess". Fidelity confirmed
the comments, first reported by Sky News.
Barclays is now paying three times more in bonuses to staff
than in dividends to its owners, a fact that business leaders'
group the Institute of Directors said should push shareholders
to be more "aggressive".
Once hailed as Saint Antony for his pledge to overhaul the
hard-charging culture at Barclay's investment bank, Jenkins is
instead on the defensive after raising the 2013 bonus pool to
2.4 billion pounds ($4 billion) despite the fall in profits.
While investors do not have a vote on overall pay levels at
banks, some told Reuters last week they could voice
dissatisfaction at banks' failure to cut overall pay by voting
down remuneration for executives. Shareholders in British
companies have a binding vote on directors' pay.
Barclays holds its annual general meeting on April 24.
Barclays declined to comment on the criticism. Its shares
dropped 2.4 percent to 236.1 pence on Tuesday after sagging as
low as 233.6p, their lowest level since December 2012. The stock
has fallen 15 percent since results on Feb. 11 amid concern that
fixed income revenues have stayed weak across the industry, and
Barclays is losing share to U.S. rivals.
Bumper bonuses have been widely blamed for encouraging the
risk-taking that contributed to the 2007-09 financial crisis,
which saw taxpayers bail out lenders with billions of pounds and
euros of public money.
But efforts to rein them in have failed, with almost half of
Britain's bankers and other financial service professionals set
to get a higher bonus for 2013 than they did in 2012 and the
average payout rising by nearly a third, a survey showed.
Barclays has often been a lightning rod for pay issues in
Britain as it has the largest investment bank and the highest
pay scales among UK lenders. But this year other lenders have
also irked regulators and politicians.
Banks in Britain have led the way in raising fixed pay in
response to new European rules that cap banker bonuses. The
banks say they have no choice but to raise other forms of pay or
lose top talent to U.S. rivals that have no bonus caps.
Britain's HSBC has said it will use "allowances",
paid monthly or quarterly to raise fixed pay. UK peers Lloyds
and Barclays last week indicated they would follow
Their actions prompted European lawmakers on Monday to agree
to consider a revamp of the bonus rules to prevent British
bankers from softening their impact.
The Bank of England is also looking at the allowances to see
if they are a covert way of avoiding the EU bonus cap.
While Britain's Conservative-led government is challenging
the bonus cap in the EU's top court, fearing its impact on
London's banking hub, British lawmakers from across the
political spectrum are unhappy that bonuses are rising.
Andrew Tyrie, a Conservative backbencher who leads an
influential parliamentary committee on banking, has warned that
authorities may need to step in to cap pay. The opposition
Labour Party has said if it returns to government next year it
could reintroduce windfall taxes on bankers' bonuses,
potentially raising 2 billion pounds.
Labour introduced a "one-off" bonus levy in 2009.
Shareholder advisory group Pirc said stiffer rules might be
the only thing that works.
"If the big banks have not got the message of restraint by
now maybe it's time for stronger regulations," a spokesman for
Pirc said on Tuesday.
The main concern among Barclays shareholders is that Jenkins
does not have control of costs in the investment bank, one
person familiar with the matter said.
Jenkins has told investors the bank increased the bonus pool
because of a big rise in departures in its U.S. investment bank
after it cut bonuses in 2012 more than rivals.
The departure rate in the U.S. investment bank doubled last
year to near 10 percent, people familiar with the matter said.
Barclays' annual report last week showed the bank paid 481
employees at least 1 million pounds last year, up from 428 the
year before. It said 57 percent of them were based in the United
States and 27 percent were in Britain.