Ahead of a meeting on Tuesday with President Nicolas Sarkozy, French bankers meeting with France's Economy Minister Christine Lagarde (pictured) on Monday agreed to make concessions on excessive bonus payments amid growing public anger.
Amid mounting public anger over the one billion euros (1.4 billion dollars) set aside by French bank BNP Paribas for possible bonus payments, leading French bankers told France’s Economy Minister Christine Lagarde on Monday that they would be prepared to make concessions.
Ahead of a meeting with President Nicolas Sarkozy on Tuesday, the bankers nevertheless said they wanted their efforts to be matched by other banks internationally.
"French banks are already committed to change. If any new propositions are made, we are ready to go further," a banker who didn't want to be named told Reuters. "We can make some proposals. But the international banking world has to do the same," said the source.
BNP Paribas received 5.1 billion euros in aid from the state as part of France’s bank bailout plan, after seeing its net profits plummet by more than 60% during the global financial meltdown. The lure of fat bonuses has been pinpointed as one of the main reasons bankers and traders take the kind of excessive risks that underpinned last year’s market crisis.
While action doubtless needs to be taken, President Sarkozy needs to walk the delicate tightrope of calming outraged public opinion while maintaining Paris’s competitiveness as a global financial centre.
Echoing this point, Lagarde said on France Inter radio last Monday that, “Public opinion will not put up with excesses and abuses. We must put an end to them”. She went on to declare that she would act against policies that encourage excessive risk-taking.
French politicians have joined the chorus in rebuking banks – but so far to little effect. A first emergency meeting held by Prime Minister Francois Fillon on 7 August did not lead to any new payment caps or guarantees from banks. President Sarkozy has already met with bankers six times in less than a year to discuss the crisis in banking.
Lagarde declared that she expected banks to “go further” in the propositions already made to regulate bonus payments, although most observers expect banks to simply be more specific about the application of already existing guidelines rather than propose any new ones.
Banks can currently offer guaranteed bonuses, sometimes stretching for a number of years, to woo star performers away from rival houses. Lagarde has called the principle of guaranteed bonus payments “unacceptable”. In February, French banks agreed to limit guaranteed bonuses to a one-year period.
Last April, the Group of 20 (G20) agreed on a broad set of guidelines on bankers pay, saying it expected “material progress” by the 2009 bonus round. Progress will be reviewed at a summit next month in the U.S. town of Pittsburgh. French government meetings with bankers on Monday and Tuesday are expected to focus on the objectives to be reached before the Pittsburgh summit.
France, Britain and Germany have all set up a framework for bonus payments, but France has so far gone furthest in its’ supervision of national bank’s practices. “Being alone in going further would mean cutting French banks off from the international finance scene” one French banker warned AFP, adding that France would lose competitiveness and influence internationally. French bonus provisions, even those of BNP Paribas, pale in comparison to those made by thriving US banks like Goldman Sachs.
According to Jezabel Couppey-Soubetran, an economy professor at the Sorbonne University, “The global financial crisis has showed us that any type of regulation of the financial sector must be implemented internationally”. This could make the upcoming Pittsburgh summit a decisive moment in the finance world, depending on whether G20 nations are ready to act together to force a thorough change in banking practices.
Date created : 2009-08-24