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Credit Suisse cuts payouts, Goldman delays as row heats

Credit Suisse is spreading the pain of a UK tax on bonuses across bankers globally and Goldman Sachs has delayed announcing payouts to staff as the row over remuneration heated up.

Credit Suisse said it would cut its global bonus pool by 5% to pay for a controversial 50% tax on UK investment bankers' bonuses.

It is the first bank to specify the impact of the tax and said bonuses for its top 400 managers in Britain would be cut by a further 30%.

Deutsche Bank said on Tuesday it would raise fixed salaries for staff and cut variable pay, following Barclays Plc and other rivals in lifting base pay, potentially to reduce the burden of the tax.

Meanwhile, the Dutch government, plans to cut bonuses at nationalized bank ABN AMRO by 65% and cap the salaries of board members.

The UK tax, announced suddenly less than six weeks ago, affects thousands of top bankers working in London and has forced banks to scramble to rework payout plans.

Most were expected to swallow the cost of the tax themselves, rather than pass it on to staff but some bankers now appear set to take some of the hit.

Banks are heading into one of the most controversial bonus seasons of recent years, facing intense scrutiny and a fast-changing landscape as politicians vow to stop bankers earning millions just months after being rescued by state bailouts.

“There had to be some movement on the part of banks, because digging in and sticking fingers in your ears just wasn't going to be a tenable position to take,” said Ben Kingsley, partner at law firm Slaughter and May in London.

“It's not surprising that banks should want to engage in the dialogue. These are all still policies that are in the process of developing.”

Other countries, including France and the United States, are also attempting to rein in pay.

Sweden's finance minister on Tuesday called on his counterparts in Europe to follow the US and Sweden and impose a supertax to recoup the costs of propping up the industry.

“We cannot accept a situation where the bankers are running away from the bill,” Anders Borg said ahead of a meeting of EU finance ministers, saying there was support for the idea from “several” of his colleagues.

The United States last week proposed Wall Street pay $90 billion over 10 years to reimburse taxpayers for the financial bailout, as President Barack Obama slammed bankers for their “obscene bonuses”.

Bankers at Goldman Sachs, the focus of much of the public outrage over excessive bonuses, will hear about their payouts next week, a person familiar with the matter said.

The investment bank had been expected to give staff the outline of their payouts on Monday, in line with previous years when they were told a couple of days before full-year results, which are due on Thursday.

A spokesman for Goldman said reports saying Britain's Financial Services Authority had blocked its compensation package were wrong.

Goldman has sparked outrage among critics for preparing to pay more than $20 billion in compensation this year, only months after benefiting from a $10 billion US taxpayer bailout.

Some insiders have blamed the Wall Street powerhouse for not taking a more restrained approach and for stoking public anger. Chief Executive Lloyd Blankfein ruffled feathers last year when he said his and other banks were doing “God's work”.

Britain had expected to raise Ł550 million from the tax, but the industry is now expected to pay out over Ł4 billion unless there is a swift U-turn in plans.

J.P. Morgan on Friday said it would pay a record $9.3 billion to its investment bankers, working out at about $379,000 per person, which could see its UK levy alone top Ł300 million, according to a conservative estimate. (Reuters)