France's Lagarde attacks bank bonus culture

22nd July 2009, Comments 0 comments

France's finance minister slammed banks that have restarted paying staff guaranteed bonuses as an "absolute disgrace".

London – France's finance minister slammed banks that have restarted paying staff guaranteed bonuses as an "absolute disgrace," following the global financial crisis, a report said Wednesday.

Christine Lagarde told the Financial Times that governments should take up the issue at the G20 summit of world leaders in September.

Lagarde urged G20 governments to stop "procrastinating" and introduce curbs on such pay practices deemed to encourage risk taking.

"I think it is an absolute disgrace that guaranteed bonuses of several years could still be paid, or that some people are thinking of reinstating the old ways of compensating with insufficient relationship between compensation and lasting performance and risk taking," she told the FT in an interview.

The global financial crisis erupted in August 2007 as banks faced massive exposure to complex and opaque investments in the collapsed US subprime or high-risk home loan market.

The worst international financial crisis for decades has since dragged most major economies into a deep recession.

Bonuses have been heavily criticised amid revelations some bankers and traders were rewarded for taking financial risks to make profits that later turned to heavy losses.

Some global banks have recently restarted offering guarantees to recruit and retain staff, although they insist the practice has been limited to top talent, the FT said.

Britain's financial watchdog this week warned that banks that have agreed to guarantee executive bonuses for more than a year risked heavy penalties.

AFP / Expatica

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