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Goldman Sachs Sets Aside $9Bn For Pay As Revenues Drop

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Goldman Sachs is set to pay as much as 45pc of its 2010 revenues to its staff in a move that is likely to reignite political anger with the investment bank just days after it settled a high-profile fraud case with American regulators.

Analysts expect Goldman to say that its closely-watched compensation ratio, which indicates the intended level of staff pay as a proportion of its revenues, is between 40pc and 45pc when it announces its second quarter results this week.

Goldman's results will also show for the first time a $600m (£392m) hit for the UK's bonus tax.

The bank is estimated to have set aside just over $9bn in pay for its staff in the first half of 2010, working out at an average payout of $235,429 for each of its 38,500 employees for the last six months of work. Goldman bankers are on track to be paid nearly $500,000 each at full year, with senior bankers being paid far more.

Goldman will argue that weaker trading conditions will result in lower total pay packages, despite the higher compensation ratio. The bank will be keen to avoid further political scrutiny following its record fine of $550m to America's Securities and Exchange Commission for making a mistake in marketing one of its investment products to clients.

Over the past year, Goldman reduced its compensation ratio to 36pc of revenues in the face of a storm of protest that was sparked by the bank's results exactly a year ago. In its second quarter results last year, Goldman allocated $6.65bn for staff compensation on profits of just $3.4bn.

Although compensation is not paid out until the end of the year, the plans angered investors and politicians. Goldman admitted in a regulatory filing that several investors had demanded an investigation into "alleged excessive compensation" from top earning bankers.

Still it's all been earned and these hard working bankers have helped to create the modern economy.

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