Goldman Sachs plots a way round EU bonus cap

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Goldman Sachs is devising ways to hand its highly-paid bankers a third element to pay in response to the EU's bonus cap.

As it began telling its 32,900 staff – who on average received pay of $383,000 (£233,000) in 2013 – about the size of their bonuses, it delayed informing the 6,000 staff in Europe, the Middle East and Africa about their salaries for 2014.

The decision was made while the Wall Street bank irons out its plans to make additional payments in cash and shares to those bankers who fall under the restrictions of the bonus cap, which prevents bonuses of more than 100% of salary being paid out, unless shareholders specifically approve 200%.

As a result of the cap, banks such as Barclays and HSBC are preparing to make additional awards of shares to staff which do not count as salary or bonuses. Only Goldman's European operations are affected by the cap which will affect bonuses being handed out this time next year.

The size of the average pay for the Goldman staff put a fresh focus on City pay at a time when Labour has put the bonus cap on the agenda by calling on the government to prevent Royal Bank of Scotland from paying out bonuses of 200% of salary.

Goldman's profits for the year rose by 5% to $8bn after profits in the fourth quarter fell 21% to $2.2bn and after it made provisions for litigation and regulatory proceedings of $561m, more than double the $260m of a year ago.

It was the worse year for bond trading since 2005 and during what Lloyd Blankfein, the chairman and chief executive of Goldman, described as a "somewhat challenging year".

This was seized upon by the Robin Hood tax campaign. "Bank bonus season has got off to a bad start when Goldman Sachs is doling out such colossal rewards in what's supposed to be a 'challenging environment'. With other banks due to report in coming weeks it's a timely reminder the government should stop sticking up for City fat cat pay and do more to bring banks back under control," the campaigners said.

In a conference call with analysts, Harvey Schwartz, chief financial officer, said 2013 had been a year of "two steps forward and one step back" for the economy. The average pay per head was down on the $400,000 paid last year and the overall pay of $12.6bn was down 3% year-on-year.

The closely watched ratio of pay to revenue – which provides an indicator of the largesse lavished on staff – was down slightly to 36.9%, compared with 37.9% for 2012.

In remarks that may indicate the firm is expecting a strong start to the new year, Goldman said its backlog of investment transactions at the end of the year had "increased significantly" compared with 2012.

Powered by Guardian.co.ukThis article was written by Jill Treanor and Dominic Rushe, for The Guardian on Thursday 16th January 2014 20.15 Europe/London

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