Sarkozy walks the walk on bonuses
Nicolas Sarkozy’s plans to reform bank bonuses are out, and for once there appears to be some substance to the French President’s flamboyant style:
President Nicolas Sarkozy unveiled new rules for French banks to limit traders’ bonuses on Tuesday and said he would fight to persuade other G20 leaders to adopt the same position.
He said on pay in French banks would now be more closely tied to results.
“From now on, the trader must wait three years to cash in all of their bonus and if in the two years following, their activity loses money, he will not have his bonus,” he said.
Sarkozy, who was speaking after meeting French bankers, said the state would not give mandates to banks who refused to follow the rules and that the head of BNP Paribas had already agreed to put them in place.
None of these proposals are particularly new. The idea of “clawing back” traders’ bonuses when they subsequently lose money was adopted by UBS last November. And most big investment banks were vesting bonuses over a three-year period even before the crisis struck. French banks are probably just relieved that Sarkozy is not putting an absolute cap on bonus payments.
Nevertheless, if Sarkozy’s rhetoric is reflected in the fine print of the proposals, France’s bonus regime will be more restrictive than the one recently adopted by Britain’s Financial Services Authority.
Of course, Sarkozy does not have to worry about triggering a brain drain of bankers to other financial centres. Most French bankers fled Paris for London and New York a long time ago.