Amidst market conditions which are tougher than had been forecast, Goldman Sachs has announced that it will be lowering salaries of bankers in London. This decision is in regards to mid-level employees who had been granted a two year contract for a fixed rate salary to assuage their fears during the financial crisis of 2009.
At the time, bankers were under scrutiny of regulatory bodies and politicians due to the turmoil arising from the global market meltdown and the scandal that ensued with the millions in perks which had been squandered on high level bankers.
However, mid level bankers were afraid that market conditions and political pressure would push them out of work so to reassure them, Goldman Sachs gave them contracts for two years which had inflated pay increases. This measure was meant to calm their fears.
Now, the contracts are ending and the bankers have been notified that their salaries will be reduced in order to be in line with current market conditions which are tougher than had been forecast. Unfortunately, this is expected to continue for some time as it does not appear that the financial sector will be rebounding any time in the near future.
In order to understand why salaries around the globe have been increased, it was in response to those huge one-off bonuses that were the cause for so much controversy in 2009. Even so, within the past year or two, many bankers have had their salaries increased by as much as 100% to make up for the lack of one-off bonuses. Now these bankers are facing a reduction in pay as well as the absence of those controversial bonuses.
While many banks such as Credit Suisse, UBS and Barclays are cutting staff in an effort to keep costs under control, Goldman Sachs is trying the strategy of cutting back salaries to maintain until market conditions improve.
