EU likely to reject Obama banking limits

THE European Union will more than likely reject US President Barack Obama’s plan to limit banks’ size and trading activities in a bid to reduce risk in the sector.

EU sources indicated the 27-nation bloc would instead focus on raising banks’ capital requirements and tightening financial regulation and pursuing initiatives already under way in the European Parliament.

Obama’s dramatic proposals would prevent banks from investing in, owning or sponsoring a hedge fund or private equity fund, and set a new limit on banks’ size in relation to the financial sector.

Senior officials in France, Britain and Germany yesterday offered support for Obama’s plan but stopped short of saying they would follow suit.

“He’s developing a solution to what he sees as the American issues; we’ve already taken the necessary action in Britain,” said British Treasury Minister Paul Myners.

Meanwhile Wall Street banking giant Goldman Sachs yesterday showed signs of bowing to public anger on excessive pay despite annual profits of $13bn (€8.6bn). The firm, which employs 22,600 people worldwide, paid $16.2 billion (€11.5 billion) in compensation and benefits for the year – a whopping 48% above 2008 levels.

But Goldman said its share of revenues paid out in salary and benefits for 2009 was 35.8% – its lowest as a public company.

Revenues at the bank were just 2% below the record levels achieved in 2007, but total compensation and benefits were 20% – or €2.8 billion) – lower than two years earlier, Goldman said.

Goldman Sachs took €7.2bn from the US Treasury at the height of the crisis but has paid the money back, with taxpayers earning €1bn on the investment.

The bank added that it had paid €4.5bn in corporate taxes during the year as well as contributing €352m from its pay pot to a charitable fund during the final quarter of last year.

Chief executive Lloyd Blankfein said the results represented a “strong performance” from the bank.

“That performance, as well as recognition of the broader environment, resulted in our lowest ever compensation to net revenue ratio.”

The Goldman Sachs results caused outrage in Britain, where the bank employs 5,500 people. Chancellor Alistair Darling has placed a one-off 50% tax on bonuses above £25,000 (€28,700), although the bank declined to comment on reports that it was putting a cap on the bonuses of its British staff as a result.

Bristish-based TUC general secretary Brendan Barber condemned the high level of bonuses at the bank.

He said: “Goldman Sachs wants us to believe that its bonus payouts are modest. But the truth is we have set up an international welfare state for super-rich bankers.”

Goldman Sachs’s chief financial officer, David Viniar, said the impact from Britain’s bonus tax could run into “several hundred million dollars”.