Goldman chief backs calls for shift in bankers’ bonus policy

The chairman of American banking giant Goldman Sachs, Lloyd Blankfein, has come out in the open against fat pay cheques for bankers, saying that the clamour over bank compensation programmes and bonuses was "understandable and appropriate" and that multi-year guaranteed employment contracts "should be banned entirely".

"There is little justification for the payment of outsized discretionary compensation when a financial institution lost money for the year," Blankfein told a banking conference in Frankfurt.

Many banks pay fat pay cheques as well as bonuses to their executives despite the sector hit by large losses and governments pumping in billions of dollars of tax payers' money into the system, drawing criticism from many quarters.

The payment of bonuses to individual bankers based on how much money they earn for the bank, which critics claim encourages them to try to maximise returns by taking bigger risks that fuel banking crises.

Goldman Sachs paid $4.8 billion in bonuses, or over twice its income, though it reported a better-than-expected net profit of $3.44 billion for the three months to June, said a report by the office of New York Attorney Andrew Cuomo.

Similarly, Morgan Stanley awarded bonuses of $4.5 billion while earning just $1.7bn. Citigroup and Merrill Lynch paid bonuses of $5.33 billion and $3.6 billion, respectively, while seeing losses of more than $27 million each, the report noted.