Goldman Sachs bankers in London are wondering what happens next to their allowances
If you're a managing director at Goldman Sachs in London, you might be hopeful about this year's bonus. Goldman has removed the European Union's bonus cap and is now able to pay bonuses equivalent to 25x salary. If your salary is £300k ($395k) your bonus might therefore be £7.5m this year.
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With the prospect of a higher bonus, however, comes the prospect of lower fixed pay. When bonuses were capped at twice salaries, London bankers at Goldman and elsewhere received both salary and allowances. For the purpose of the cap, allowances were treated as salary. They could be huge. At JPMorgan, for example, Daniel Pinto received a salary of $475k, an allowance of $7.6m and a bonus of $16m.
At Goldman Sachs, managing directors say they were told last year that their allowances would be halved as of July 1st 2024, at which point allowances were referred to as "transition pay." Richard Gnodde, the CEO of Goldman Sachs International at the time, is said to have sent a vague message to the bank's MRTs in which they claim he failed to clarify the firm's plans for allowances. There are fears they will be eliminated entirely by 2026.
Will this happen? A spokesperson for Goldman Sachs declined to comment. Morgan Stanley, is still thought to pay generous allowances in London - but Morgan Stanley has not disclosed its maximum level of bonuses after removing the EU cap.
One headhunter says Goldman Sachs is ahead of the curve when it comes to allowances. "Without the 2x bonus cap, then allowances will need to come down," he says. "It's just a question of who's ballsy enough to do it first."
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