Sarkozy forces bankers to limit bonuses
PARIS: President Nicolas Sarkozy forced French bankers to accept new rules limiting bonuses paid to traders on Tuesday and vowed to take his campaign for greater market regulation to next month's G20 summit.
Sarkozy summoned financial executives to the Elysee Palace to warn them that the government, having loaned billions to banks to see them through the credit crunch, would not accept a return to a culture of unregulated pay-outs.
"We will not work with banks who do not apply these rules," Sarkozy told reporters after what was his seventh banking summit since the crisis began, warning: "I want banks who do not play by the rules to be punished."
The head of the French banking federation confirmed that its members had agreed to new restrictions, under which a two-third chunk of traders' bonuses would be suspended to take into account bank results.
"One third of the delayed portion will be paid in shares in the business for which traders work and, in particular, a penalty system will be put in place," Sarkozy explained on the steps of the Elysee.
"If performance is not up to scratch over the period, the delayed portion of the bonus will not be paid. No bonuses without penalties."
The G20 group of the world's biggest economies is due to meet on September 24 in the US city of Pittsburgh in order to discuss new market regulations in the light of last year's global financial meltdown.
"Obviously the question of bonuses cannot be handled by France alone. But that is no reason to sit and do nothing," Sarkozy said.
"France will propose that all the great financial centres of the G20 adopt the rules for transparency, oversight and responsibility that are now in place on the Paris market," he promised.
Baudouin Prot, chairman of both BNP Paribas and of the French Banking Federation, said his own bank had agreed to delay around a billion euros in bonuses planned for next year until after its results.
Under the new system, BNP-Paribas will thus reduce the amount set aside for bonuses in the first half of 2009 to 500 million euros, said Prot.
Sarkozy had summoned executives to his office Tuesday in response to the public anger triggered by the news that BNP-Paribas, which last year received a 5.1 billion euro state loan, was preparing to pay out a billion to traders.
Following the talks, Prot said that the banks had promised "strengthened oversight and transparency" in their remuneration schemes and that bonuses could be replaced by penalties in the event banks lose money.
But he warned that it would be difficult "for these restrictions to be put in place in one country alone."
Following last year's crash, Sarkozy called for stricter regulation of financial markets and an end to traders' bonus culture, which many blame for the excessive risk-taking which caused the economic collapse.
France's position has been undermined, however, by news that at least one of its own banks has already set aside a vast sum for bonuses and by warnings from bankers that Paris payments must compete with London and New York.
"France will tell its 19 partners not what it plans to do, but what it has already done. We will tell them it is possible to change financial capitalism," the French leader said.
Before the talks, French banks had simply promised to abide by rules agreed by the G20 leaders at their last meeting in April, restricting guaranteed bonuses and tying pay-outs to long-term performance.