Jim Armitage: Goldman Sachs, the cleverest of banks, was always going to find a way around Brussels' efforts to put a limit on its lavish bonuses

Global outlook: Whatever deal Goldman has struck, expect other global banks to follow

We should have guessed. Goldman Sachs, the bank that created the most complex alphabetti spaghetti derivatives, options, swaps and other financial “instruments”, the bank that invented devices enabling Greece to game the euro entry rules, the bank which found a way to make the US taxpayer repay it 100 cents in the dollar for its multibillion-dollar exposure to the collapsed AIG, was never not going to find a way around the European bonus cap.

This cleverest of banks, stuffed with the smartest, most ruthless money-making minds in the world, was always going to be the first to ensure its famously lavish pay structures would survive the best efforts of Brussels.

And so it is that “GS”, as its simple Wall Street ticker code calls it, has reportedly found a way around the system yet again. British regulators, working for a Government which never liked the caps in the first place, have approved a plan reputedly as complex as the most baffling CMBS, CDS or other exotic derivative that Goldman ever created.

It’s easy to imagine the watchdog-mandarins being suckered in like those saps of Colonel Gadaffi allegedly were in Libya’s sovereign wealth fund. Think Mowgli gazing into the kaleidoscope eyes of Kaa.

Nobody knows precisely how Goldman has done it, so we are left to guess.

The phrase “role-based allowances” is apparently to be used instead of “bonus” for part of the variable pay contracts. But quite what that is we can but conjecture.

Clearly, it cannot be individually performance based or it will fall foul of the EU rules. We know that allowances will be paid monthly and vary depending on the “economic conditions”. This is, the bank argues, to give itself some flexibility with the payroll for when the next big downturn, or upturn, comes. If you won’t let us slash bonuses in times of financial famine, at least allow us variable allowances based on the economy, it argues.

But “economic conditions” seems a weaselly expression. Do the economic conditions being experienced by the bank not depend at least partly on the success of trades carried out by its staff? economic conditions for John Paulson’s hedge fund were just dandy during the financial crisis, because he had a bet the size of Fort Knox against the subprime mortgage market. The point is that all banks have different views on what the ideal economic condition is, and they adjust their exposures accordingly.

Hopefully, the regulator has forbidden any such trickery about the economic definition and has insisted on some fairly straightforward measure. European GDP and employment growth would be nice, given that the purpose of these giant banks is to invest and support European enterprise. Perhaps even a blend of GDP growth, jobs and net lending by banks.

But don’t expect anything so simple.

Meanwhile, don’t be surprised if the pay related to those external factors is geared so the wage rises exponentially on the up and falls only slightly on the way down. Heads we win, tails Brussels loses.

Whatever deal Goldman has struck, expect other global banks to follow. We know Barclays has already started negotiating on its own role-based allowance scheme. Just don’t expect it to be as clever.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Arts and Entertainment
Attenborough with the primates
tvWhy BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
News
Kelly Osbourne will play a flight attendant in Sharknado 2
people
News
A bartender serves beers
news
Arts and Entertainment
Daniel Craig and Rory Kinnear film Spectre in London
film
Life and Style
The finale at Dolce and Gabbana autumn/winter 2015
fashion
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003
Barbara Woodward: Britain's first female ambassador to China intends to forge strong links with the growing economic superpower

Our woman in Beijing builds a new relationship

Britain's first female ambassador to China intends to forge strong links with growing economic power
Courage is rare. True humility is even rarer. But the only British soldier to be awarded the Victoria Cross in Afghanistan has both

Courage is rare. True humility is even rarer

Beware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
Alexander McQueen: The catwalk was a stage for the designer's astonishing and troubling vision

Alexander McQueen's astonishing vision

Ahead of a major retrospective, Alexander Fury talks to the collaborators who helped create the late designer's notorious spectacle
New BBC series savours half a century of food in Britain, from Vesta curries to nouvelle cuisine

Dinner through the decades

A new BBC series challenged Brandon Robshaw and his family to eat their way from the 1950s to the 1990s
Philippa Perry interview: The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course

Philippa Perry interview

The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course
Bill Granger recipes: Our chef recreates the exoticism of the Indonesian stir-fry

Bill Granger's Indonesian stir-fry recipes

Our chef was inspired by the south-east Asian cuisine he encountered as a teenager
Chelsea vs Tottenham: Harry Kane was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope

Harry Kane interview

The striker was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope
The Last Word: For the good of the game: why on earth don’t we leave Fifa?

Michael Calvin's Last Word

For the good of the game: why on earth don’t we leave Fifa?