The plan prompted criticism from lawmakers and from within the banking industry
The bank decided at a compensation committee that it should not go ahead with the proposal
Bank of England Governor Mervyn King criticised the idea at a Treasury select committee
Goldman Sachs has backed down from a plan to delay UK bonus payments until after the new UK tax year, which would have allowed bankers to benefit from a cut in the top rate of tax from 50 to 45 per cent.
The Wall Street bank decided at a compensation committee meeting on Tuesday that it should not press ahead with the proposal.
The idea – first reported by the Financial Times on Sunday – would have seen the payment of the deferred portion of bonuses from prior years delayed from February until after April 6.
News of the plan prompted a flurry of criticism from lawmakers and even from within the banking industry.
Addressing the House of Commons Treasury select committee earlier on Tuesday, Sir Mervyn King, governor of the Bank of England had criticised the idea.
“I find it a bit depressing that people who earn so much find it would be even more exciting to adjust their payouts to benefit from the tax rate, knowing that this must have an impact on the rest of society, which is suffering most from the consequences of the financial crisis,” Sir Mervyn told MPs.
“I think it would be rather clumsy and lacking in care and attention to how other people might react. And in the long run, financial institutions do depend on goodwill from society,” he added.
On Monday, at a parallel parliamentary committee – the Commission on Standards in Banking – Anthony Browne, chief executive of the British Bankers Association, had told lawmakers that the Goldman initiative was bad for an industry that was trying to reinvent its image and restore faith in its ethics.
“It clearly doesn’t restore trust,” Mr Browne said. Goldman Sachs is the only major City institution not represented by the BBA.