Goldman might pay early, avoiding EU bonus reforms

On 1st January 2011, a lot will change when it comes to bonuses.

From that date, the EU's bonus rules will come into being, specifying that at least 40-50% of compensation must be deferred over three years, that cash can't be more than 30% of the total bonus (20% for 'large bonuses'), and that bonuses will be restricted as (undetermined) multiples of salary.

Given the Committee of European Banking Supervisors has also said it will be doing nothing to help ease the burden of adopting the new rules, and that January 1st is fast approaching, it might seem opportune to pay bonuses in 2010 and to leave the adoption of the new rules for the next bonus round.

At least, this is an option that appears to have been weighed by Goldman Sachs.

CNBC reports that the bank has been contemplating bringing 2011 payments forward because of the likelihood that Bush tax cuts will expire in January.

In doing so, it would avoid EU rules too.

However, now that Goldman's year end has been changed to December 31st instead than November 30th as it was historically, bringing payments forward would be an accounting challenge.

It would also mean that Goldman bankers would miss out on the contribution of an apparent end-of-year-resurgence to the 2010 bonus pool. Various banks have spoken of improved conditions in September and October, and last week Macquarie predicted profits for the next six months would be at their highest in 3 years on the back of rising confidence.

Bonuses brought forward and paid this year may be subject to less rigorous deferrals. But they may also be lower.