Financial Regulatory Forum

INTERVIEW – France sees G20 shifting its way on financial regulation

By Reuters Staff
September 1, 2009

France's Economy Minister Christine Lagarde is seen during an interview with Reuters at the Economy Ministry in Paris September 1, 2009.  REUTERS/Charles Platiau By Anna Willard
PARIS, Sept 1 (Reuters) – France is optimistic about upcoming G20 meetings because many leaders, including British Prime Minister Gordon Brown, have moved closer to the French position, Economy Minister Christine Lagarde said.

In an interview with Reuters on Tuesday, Lagarde said there were disagreements in Europe over accountancy rules and the speed at which reforms should be carried out.

But she hoped there would be progress on drawing up sanctions for tax havens and on traders’ bonuses at a meeting of G20 finance ministers in London on Sept 4 and 5 and of leaders in Pittsburgh on Sept 24-25.

French officials have pushed hard for tough new financial regulation, accounting standards and limits on bankers’ bonuses ahead of the meetings but many of their proposals have been met with initial scepticism in other countries.

“You are telling me that as a follow up to our statements and our positions people have been lukewarm. Well…lukewarm is better than cold,” she said.

“If I compare the position and statements by Prime Minister Gordon Brown say only a year and a half ago compared with what he is now saying including in the Financial Times this morning. It’s a major shift, a major shift.”

Brown promised “tough action” on excessive remuneration but the newspaper said he was “unenthusiastic” about French-led pressure to set a mandatory cap on bankers’ bonuses.

“We have progressed from freezing…to lukewarm and who knows with a bit more effort and a bit more time we might go from lukewarm to warm,” she said.

SANCTIONS
Lagarde said she was hoping for agreement on a list of sanctions for countries seen as tax havens.

“We need to say we will not do business with those non-cooperative centres.”

France was also hoping to convince other countries to adopt stricter rules on traders’ bonuses.

“If that does not work, and some banks do not want to play the game, some members do not enforce those rules, well we should not do business with them,” she said.

“It’s as simple as that.”

President Nicolas Sarkozy last week unveiled new rules for French banks requiring them to defer part of a traders’ bonus and saying that banks which did not follow the new rules would be excluded from state business. He wants other G20 countries to put in the place the same rules.

Lagarde said she would meet with French banks again to report back after the Pittsburgh meeting to define what the national rules will be.

“We will keep strong national rules, no doubt about it. Equally, it is not my job to run down and destroy the financial centres, the financial activities of Paris.”

France was also hoping for progress on accounting standards but said there was disagreement with Britain.

“I would say that the accounting issue is one that is a bone of discussion between the UK, on the one hand, and most of the rest of us on the other hand,” she said.

EXIT STRATEGIES
Lagarde, who will attend a meeting of European finance ministers in Brussels on Wednesday, said there were also differing views in Europe about the speed of reform.

“There is a varying degree of urgency and commitment to deliver practical and efficient measures to apply the principles that everybody agrees on,” she said.

The economy was not out yet out of the crisis and so it was not yet time to remove stimulus measures, she said

“The crisis is not over. We are still encountering significant difficulties and one clear sign of that is the unemployment rate in all our countries,” she said.

She said France would examine its stimulus package to see whether any of the measures needed to be adjusted.

“We have …to see whether the right position is there and decide on any further action whether it is by way of gradually removing some of the tools and exiting, tiptoeing out of the stimulus package or whether it is continuing it, slowly, gradually into 2010,” she said.

The car scrappage scheme would continue into 2011, she said.

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