Barclays, Britain's second-largest lender by assets, paid investment bankers bonuses "incapable of justification" as employees focused on revenue at the expense of clients, according to an internal report.
In the report, commissioned by the bank after it was fined £290 million (HK$3.4 billion) in June for manipulating Libor, Rothschild vice-chairman Anthony Salz criticised Barclays for failings in its culture.
In parts of the firm, there was "a sense that senior management did not want to hear bad news", which "contributed to a reluctance to escalate issues of concern", Salz wrote.
"Pay contributed significantly to a sense among a few that they were somehow unaffected by the ordinary rules," said the 236-page report, published yesterday.
"A few investment bankers seemed to lose a sense of proportion and humility."
Antony Jenkins, who replaced Robert Diamond as chief executive in August, is seeking to rein in pay and boost profits for shareholders to help restore investor confidence in the wake of the scandal over the fixing of the London interbank offered rate. The London-based bank plans to eliminate 3,700 jobs this year after losing £1.7 billion last year.
"We concluded that the reputational problems for Barclays stem in part from the perception that, at least in the UK, some bankers have appeared oblivious to reality," the report said.
"Despite billions of pounds of liquidity support from taxpayers, many senior bankers seemed still to be arguing that they deserved their precrisis levels of pay."
Barclays paid its top 70 executives "consistently and significantly above" the industry norm, the report said. Managing directors at its investment bank received base pay of about £150,000 to £300,000, plus an average bonus of about 70 per cent of their salary last year.
Some senior employees received bonuses equivalent to more than double their base pay, it showed.
Linking pay to revenues encouraged mis-selling of products such as the wrongly sold loans insurance, the report said.
The bank's consumer unit said in October it would stop awarding bonuses to employees based on sales and instead focus on customer satisfaction.
The number of employees earning more than £1 million last year dropped to 428 from 473 in 2011, according to the annual report published on March 8.
"Our initial review of the report's recommendations is that they are substantially aligned with work already progressing," Barclays chairman David Walker said in an e-mailed statement.
The review cost £13.7 million.