Sarkozy confronts bankers over bonuses
Sarkozy summoned heads of French banks to talks in another attempt to end the industry's excessive risk-taking culture.Paris – President Nicolas Sarkozy has summoned French bank executives to talks Tuesday as he tries to show both angry taxpayers and his foreign partners that he is serious about cracking down on bonuses.
The bankers refused to comment on Monday after three hours of preparatory discussions with Finance Minister Christine Lagarde, as France prepares for next month's Pittsburgh G20 summit of the world's leading economic powers.
Following the global economic crash, Sarkozy called for stricter regulation of financial markets and an end to traders' bonus culture, which many blamed for the excessive risk-taking which caused the collapse.
France's position has been undermined, however, by news that at least one of its own banks had set aside a vast sum for bonuses and by warnings from executives that Paris traders' earnings must compete with London and New York.
Officials from Lagarde's office said she asked the heads of French banks, many of which received multi-billion-euro bail-out loans from taxpayers in the wake of the credit crunch, to come up with tighter rules on bonuses.
So far, the banks had simply promised to abide by recommendations agreed by the G20 leaders in London in April, restricting guaranteed bonuses and tying pay-outs more closely to long-term performance.
But these limitations did not prevent BNP-Paribas from setting aside around EUR 1 billion in bonuses for its traders, a sum which angered French voters and inspired Sarkozy to call Tuesday's talks.
This will be the French president's seventh meeting with French finance executives in a year, and an opportunity for him to affirm his status as a champion of regulation ahead of the 24 September meeting of the G20.
"A lot of things have already been done, but we must go much further. We'll see what the bankers put on the table," said Frederic Lefebvre, spokesman for Sarkozy's right-wing UMP party, at a news conference on Monday.
"Our country, that's to say our political authorities, sets an example on the international stage. We need our banks to do the same," he warned.
For the Socialist opposition, former prime minister Laurent Fabius urged that bonuses above a certain sum – he suggested EUR 1 million – be subject to a super tax and that bank shareholders set bonus levels.
"Bonuses are doubly harmful, firstly from an ethical standpoint," he told Europe 1 radio, "but also in terms of the general economic outlook, because, for example, traders have won a lot of money by betting on a slowdown."
The banks defended themselves by insisting that if they did not pay traders enough they could lose their best staff to London or New York.
"It's essential that any new measures that could be imposed on French banks are applied equally and simultaneously at an international level," said Gerard Mestrallet of Paris Europlace, which promotes the French financial sector.
"Otherwise, the Paris marketplace runs the risk of a loss of competitiveness in its business and a loss of jobs to its rivals," he insisted.
Sarkozy hopes to convince his G20 partners to agree a tighter international system of financial regulation, including commonly agreed limits on individual bonuses. Observers warn that this will be a tough sell.
Britain's banking watchdog, the Financial Services Authority (FSA), has said that from January bonuses in the City must be linked to banks' performance over at least three years, in order to prevent short-term risk-taking.
Nevertheless, the FSA has been accused of watering down proposals under pressure from high finance, and Chancellor Alistair Darling said this month that the government might crack down further if necessary.
In the United States, President Barack Obama ordered that remuneration in banks that received state bail-outs be capped at USD 500,000 (EUR 350,000) per year, but banks have now begun to pay back bail-outs, in part to escape this rule.
A separate measure to tax bonuses by 90 percent was passed by the House of Representatives but died in the Senate.
AFP / Expatica