France pushes bankers on bonuses ahead of G20
By Anna Willard
PARIS, Aug 24 (Reuters) – President Nicolas Sarkozy will push French bankers this week to do more to restrict bonuses so he can hold them up as a good example to other countries at meetings of the Group of 20 in September.
Sarkozy’s summoning of top bankers to his office on Tuesday also aims to show voters he will not allow unlimited paychecks for those seen responsible for a financial crisis which led to recession and rising unemployment in France.
The bankers, who are meeting Economy Minister Christine Lagarde on Monday, are expected to promise to do more but are worried the French position puts them at a competitive disadvantage, driving top talent away to foreign banks.
Sarkozy and Lagarde have been outspoken on the need to
curb bonuses at the G20 and G7 and expressed dismay at record payouts at U.S. institutions such as Goldman Sachs Group INC.
Authorities on both sides of the Atlantic are stepping up moves to prevent the return to the bonus culture that led to excessive risk-taking blamed for the financial crisis.
The issue will be high on the agenda at a meeting of G20 finance ministers in London on September 4 and 5 to prepare the leaders summit in Pittsburgh on Sept 24-25.
French banks adopted a code of good conduct based on broad G20 guidelines in February in exchange for receiving billions of euros in liquidity support from the government aimed at ending huge guaranteed bonuses.
But the debate in France was rekindled earlier this month when it emerged that BNP Paribas <BNPP.PA>, had set aside 1 billion euros for possible bonuses after reporting a 6.6 percent rise in second quarter profits.
Bank of France Governor Christian Noyer, who heads the banking regulator, said the BNP provision was in line with the G20 rules which say pay schemes should properly reflect risks that an institution has taken.
But Sarkozy is facing political pressure for France to do more and make sure other countries do the same.
“France is certainly the country which has done the most but ….we must go further,” Xavier Bertrand, a top official in Sarkozy’s UMP party told France Info radio on Monday.
Britain has threatened legislation if bankers do not change their ways.
France banned stock options in pay packages for companies receiving state support until the end of 2010 but has not yet threatened to regulate bonuses.
Sarkozy wants to make Paris a more attractive financial centre to draw market participants away from the City of London but bankers say the push on bonuses could drive people away.
“The same rules have to be applied everywhere, otherwise these activities will move, will leave Paris and go elsewhere,” SocGen Chief Executive Frederic Oudea said on Aug 7.
Sarkozy’s meeting also aims to ensure the banks are passing on the money they were offered in state support by lending to small and medium sized companies.
He created two vehicles with a potential budget of 360 billion euros ($511.4 billion) to help improve liquidity in the banking sector during the financial crisis.
“Despite the promises, small businesses are still
facing difficulties getting credit,” the CGPME small business union said in a statement.