Banking crisis continues as Goldman announces pay cuts

Investment bank Goldman Sachs, which is known for having the best-paid staff in the City, has warned of massive pay cuts for its staff as the global economic crisis continues.

The world’s most profitable bank admitted its pay and bonuses fund had shrunk by more than a third compared with a year ago.

Last year, the average employee at Goldman Sachs received just over £300,000. This could be cut to around £200,000 if global market conditions do not improve.

Goldman Sachs said profits had halved against 12 months ago in the first 3 months of this year, down to $1.51 billion (£748 million).

Compared to other investment banks, Goldman Sachs has had the least exposure to the sub-prime mortgage market. Other banks are experiencing huge write-downs because of their exposure to sub-prime.

Economists have warned that if Goldman Sachs is suffering, it is likely bonuses for other City bankers could be disastrous this year. That, together with over 10,000 expected redundancies in the City this year, will have a major impact on the London economy as big-spending bankers tighten their belts.

The Prime Minister, Gordon Brown, yesterday continued to urge calm in what he described as ‘global financial turbulence’ .

Claire Collingwood, of CMC Markets warned that in the wake of the collapse of Bear Stearns, we are still looking at the other investment banks and there are concerns that something similar could happen to one of them. The market is very cautious, concluded Ms Collingwood.

Discuss this in the Finance Markets forums

Story link: Banking crisis continues as Goldman announces pay cuts