Goldman Sachs caps pay in London at £1m

GOLDMAN Sachs will this week tell its London staff that their pay will be capped at £1 million.

The US giant, where profits jumped five-fold to $13.4 billion (8.3bn) last year, is the latest investment bank to bow to political pressure over City pay, according to a Sunday newspaper.

The move is expected to be met with frustration by staff, particularly among the bank's most senior London traders who, in some years, have taken home more than 10m each in rewards.

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Barclays is expected to tell its 130,000 staff over the next few weeks that their bonuses will be deferred, in some cases for up to three years. The bank is understood to have drawn up a new long-term remuneration structure whereby deferred bonuses, which will be mostly paid in shares, will become a permanent feature of pay deals.

No-one at either Goldman Sachs or Barclays was available for comment yesterday.

Political pressure is meanwhile mounting on the two taxpayer-backed banks, Royal Bank of Scotland and Lloyds Banking Group, which are in the process of finalising bonuses for 2009.

UK Financial Investments (UKFI), the agency that manages the government's stakes in the two banks, is understood to have urged RBS and Lloyds to show restraint when dishing out rewards amid concerns that RBS has set aside a 1.5bn bonus pool – more than 65 per cent higher than last year. Lloyds is rumoured to have budgeted to pay out at least 100m.

Robin Budenberg, the new head of UKFI, himself a former investment banker, is understood to have commenced talks with the two banks, which are due to report their 2009 financial results at the end of next month.

The RBS board in particular has expressed concerns that the bank will not be able to hold on to skilled staff if UKFI forces it into paying bonuses below market rates.

RBS has been forced, as part of the terms of entry to the government's Asset Protection Scheme, to hand over the final say on bonuses to UKFI.

City minister Lord Myners will today discuss the prospect of imposing levies on banks at a meeting with G7 finance ministers.