France tries to rein in $85,000 bonuses

French President Nicolas Sarkozy seeks international front to reduce global banking bonuses ahead of next month's G-20 meeting.

By , Staff writer

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    French President Nicolas Sarkozy, seen in this July 29 file photo, seeks international front to reduce global banking bonuses.
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PARIS - French president Nicolas Sarkozy aims to put the onus on the banking bonus.

Revelations earlier that French bank BNP Paribas had set aside some $1.4 billion in bonuses for its traders has the French now seeking a lead position in reducing such multi-billion dollar payouts ahead of the Pittsburgh, Pa., G-20 meeting next month.

But Sarkozy and Finance Minister Christine Lagarde will need help from the US and other EU states in Pittsburgh if the effort to contain banking's bonus culture is to be more than a milquetoast voluntary system, finance experts here say.

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In the seventh meeting initiated by the Elysee Palace this year – today with Ms. Lagarde and tomorrow with Mr. Sarkozy – French bankers are agreeing in principle to tougher bonus rules, including greater transparency on the practice of rewarding go-go traders with extra cash.

Fat envelopes for bank elites, regardless of their performance, has infuriated the French public – as in Britain and the US – particularly after $40 billion in French state funds were used to shore up banks in the past year. Lagarde described the bonus practice as a “culture” that is “unacceptable” – after BNP officials confirmed their bonus plans.

France was the first country to implement G-20 restrictions on the bonuses that some say are part of a culture of unregulated excess that led to the global economic crisis, and Lagarde has also lambasted bonus levels at the New York-based Goldman Sachs investment firm.

IMF head Dominique Strauss-Kahn said this summer he was “appalled at what I see,” in the bonus structures of New York and London firms.
French bonuses
But when a BNP spokesman earlier this month confirmed payouts averaging $85,000 to some 17,000 investment bankers at its trading house, French leaders were forced to respond to popular anger at home.

Whether Sarkozy and Lagarde can take the lead on bonus bashing may depend on the US and other European states agreeing to similar measures at the G-20. Lacking a more universal agreement, trading house top guns will simply move to London, New York, or Berlin, finance experts here say.

The French are reportedly discussing the idea of tying bonus awards to a bank board committee, rather than leaving them to the director of market operations – a proposal by the Swiss national bank vice-president Philipp Hildebrand.

The French newspaper Le Monde implied Monday that stricter bank requirements to report bonuses could be reinforced by rules that the state will not do business with non-complying banks.

International economic expert Christian Losson of Libération, the French newspaper which broke the BNP story, remains skeptical that French leaders have enough leverage, lacking hard rules: “Will [Lagarde] grill the bankers [today] before Nicolas Sarkozy eats them tomorrow, when he comes back from holiday?” he asks. “There are few chances that a seventh summons to the Elysée ...produces more than an umpteenth warning.”

Even before the economic meltdown, Sarkozy has been a critic of banking excess – throwing rhetorical elbows for example at Daniel Bouton, head of Société Générale, during the Kerviel affair 19 months ago, when the bank lost nearly $7 billion on a series of trades that Mr. Bouton appeared unwilling to take responsibility for.

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