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Europe

Brown joins Sarkozy and Merkel on calls to limit bonuses

Text by NEWS WIRES

Latest update : 2009-09-03

British Prime Minister Gordon Brown has joined the leaders of France and Germany in calling for the G20 to adopt "binding rules" and "sanctions" to boost transparency and curb excessive banker bonuses.

AFP - The leaders of France, Britain and Germany called in a joint letter on Thursday for the G20 to adopt "binding rules" and "sanctions" to boost transparency and rein in bankers' bonuses.

Group of 20 finance ministers meet in London Friday ahead of a Pittsburgh summit to chart the next steps out of the global economic crisis, with calls to curb bonuses as part of beefed-up financial market rules topping the agenda.

French President Nicolas Sarkozy, British Prime Minister Gordon Brown and German Chancellor Angela Merkel called for the September 24-25 summit to build on the G20's commitment last year to reform global finance, with rules on tying bankers' pay to longer-term financial performance.

"The G20 should transform the above principles into binding rules for financial institutions with sizable complex and risky business activities and ensure that there are sanctions at national level for banks that do not play by these rules," reads the letter.

"For example governments could not give mandates to those financial institutions which are recognised not to apply internationally agreed binding rules," reads the letter addressed to Swedish Prime Minister Fredrik Reinfeldt, who holds the six-month EU presidency.

"Compensation policies should encourage risk awareness for all staff involved in determining a financial institution's risk position," the three leaders wrote.

"Variable remuneration including bonuses, should be kept at an appropriate level in relation to the fixed remuneration and must depend on the performance of the bank, the business unit and the individuals," reads their letter.

The European leaders called for banks to defer payment of "a major part" of any large bonus for "an appropriate period" and for it to be cancelled in case of a negative performance of the bank.

Stock options received as part of a pay package should not be exercised or sold for "an appropriate period of time" and guaranteed bonuses should be avoided, they wrote.

The letter calls for the creation of new compensation committees, including board and staff members and risk controllers, to design compensation policies.

It also calls for "appropriate disclosure requirements" to be imposed on banks, in order to enhance transparency.

Brown, Sarkozy and Merkel argued that citizens of the G20 would judge their leaders' "commitment to build a more stable financial system" based on their determination to tackle excessive pay in the financial sector.

"The abatement of financial tensions has led some financial institutions to imagine they can return to the same modes of action prevalent before the crisis. This is not an option," they wrote.

Date created : 2009-09-03

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