Bonus culture reborn as bank staff earn £325,000 each – and counting

Published on Thursday 15 October 2009 21:20

STAFF at investment bank Goldman Sachs have notched up an average £325,000 in pay and bonuses so far this year despite government pressure to curb pay-outs.

The US banking giant said it had earmarked 10.3 billion for the first nine months of 2009 to cover compensation and benefits for its 31,700 staff globally – up 46 per cent on a year ago.

News of its bumper rewards pot came as the bank reported another quarter of strong profits growth, with third-quarter net earnings up to $3.19 billion (1.96bn) from $845 million (519.8m) a year ago.

Goldman chief financial officer David Viniar said the bank was "very focused on the economic climate" and that would be taken into account when bonus decisions were made.

But its mammoth bonus and pay pool – 3.29bn between July and September alone – is likely to fuel concerns over a return to the pre-meltdown culture of excessive rewards, blamed for tipping the world into global recession and needing billions of pounds in taxpayer bail-outs.

Goldman received a $10bn (6.16bn) government handout at the height of the credit crisis.

While it repaid the cash soon after, Goldman has been criticised for giving staff big pay-outs despite the weak economy.

The announcement is bound to cause further embarrassment in Downing Street, after Prime Minister Gordon Brown

promised the government was "doing everything in our power to curb the bonus culture" on this side of the Atlantic.

"We are determined to end the bonus culture. It was short-term and discredited," he added.

Opposition politicans have demanded more direct action to address the issue.

Shadow financial secretary Mark Hoban said: "Directly or indirectly, all banks have benefited from measures paid for by the taxpayer. Public money should be used to build up bank balance sheets, not to pay out huge dividends and bonuses.

"The government have talked a lot about bonuses but now we need action."

The Treasury announced yesterday that Goldman Sachs was one of a number of major overseas banks with UK operations to agree tougher international rules on pay and bonuses.

Officials said 11 banks, including Bank of America and JP Morgan, had signed up to G20 recommendations drawn up last month. These include so-called clawback clauses and to spread bonuses over three years or more.

Banks have been boosted by the resurgent stock market conditions and the demise of competitors such as Lehman.

Goldman said fixed income, commodities and currency trading buoyed its profits for the second quarter running.

Mr Viniar added the bank was "securing a bigger share of a smaller pie" after the financial crisis shrank the numbers of players in the investment banking sector.

Goldman, which employs about 5,500 people in London, stressed it would not make a final decision on employee bonuses until the end of the year; payments are traditionally not made until January.

The group has been one of the strongest banks in the financial crisis, given it had less exposure to toxic mortgage-backed securities than other companies.

Goldman has reported two quarters of mammoth profit gains in a row after a 65 per cent leap in second-quarter profits, to $3.44bn (2.12bn).