British bank Barclays is to pay tens of millions of pounds to its investment bankers, with some of the biggest payouts expected to go to former Lehman Brothers traders.
The bankers, who have made huge profits from trading in government debt, derivatives and foreign exchange, include former Lehman traders hired
by Barclays after it took over Lehman's US operations at a knockdown price in September.
Some Lehman staff were granted guaranteed bonuses to ensure they stayed with Barclays rather than jump ship and sign up with rivals.
The bonuses are expected to cause outrage among Barclays' British employees, who are being balloted by the Unite trade union on strike action over the scrapping of the firm's final-salary pension scheme.
Barclays has cut hundreds of jobs since the financial crisis began in 2007.
Protests are also expected from Lehman creditors, who are fighting in the courts on both sides of the Atlantic for money that was owed by the US bank before it went bust.
Barclays stepped in to buy Lehman's American business for US$250 million ($388 million), while its European arm was sold to Nomura.
The Lehman acquisition has allowed Barclays to become a major player in investment banking, competing with giants such as Goldman Sachs and JPMorgan.
Analysts say that Barclays Capital, the bank's investment arm, has become so profitable that it could account for the lion's share of the £3 billion ($7.6 billion) of interim profit that the institution is expected to report in the first week of August. Brokers say that BarCap's contribution to 2009 pre-tax profit should rise from 30 per cent of the total in 2008 to more than two-thirds.
Goldman and Morgan reported a surge in second-quarter profit last week, setting the stage for lavish bonuses at the end of the year.
The return of bonuses - Goldman's remuneration bill will top US$20 billion - has caused a political outcry, as big payouts were deemed to have helped cause the credit crunch by encouraging excessive risk-taking and irresponsible lending.
Last week, opposition Liberal Democrat party Treasury spokesman Vince Cable said that it "shouldn't be back to business as usual" for financial institutions.
But investment banks have been able to take advantage of the explosion of activity in the bond markets, where governments are raising billions to cover increased expenditure.
The banks left standing after the financial turmoil are also benefiting from a reduction of competition.
The scrapping of Barclays' final-salary pension scheme - even for existing members - has been labelled "a betrayal" by the trade union Unite.
- OBSERVER
British bank Barclays is to pay tens of millions of pounds to its investment bankers, with some of the biggest payouts expected to go to former Lehman Brothers traders.
The bankers, who have made huge profits from trading in government debt, derivatives and foreign exchange, include former Lehman traders hired
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