Sarkozy unveils new bonus rules for French banks

(Agencies)
Updated: 2009-08-26 03:35

PARIS: French President Nicolas Sarkozy announced new limits on bonus payments to bank traders on Tuesday and said he would press partners in the Group of 20 nations to adopt the same standards as Paris.

Amid growing international concern over bank bonus payments that have been creeping up to levels seen before last year's financial market meltdown, Sarkozy called in the heads of France's biggest banks to announce tougher controls.

"I was scandalized to see the lessons of the crisis being forgotten so quickly by some people at a time when the page has not even been turned on the crisis," Sarkozy said after the meeting the Elysee Palace.

Outrage over bonuses in France has been stoked by concern that banks have been tight-fisted in lending to small companies, despite the massive injections of public support made available to the financial sector.

He said banks would henceforth be required to defer two thirds of bonuses paid to traders over three years and make a third of the payout in bank stock.

If an operation on which a bonus was paid lost money in the two years afterwards, the deferred part of the bonus would not be paid out.

He said compliance would be closely monitored and banks that did not follow would be shut out of lucrative mandates for state activities such as share placements and privatisations.

"We will not work with banks that do not apply these rules," he said.

Sarkozy has been among the loudest international critics of unrestrained financial market practices and has seized on public outrage over the huge bonuses widely blamed for encouraging the excessive risk-taking that contributed to the financial crisis.

The issue was already addressed at a G20 meeting in London earlier this year and is expected to be among the top issues at a meeting of G20 finance ministers in London on Sept 4-5 and the leaders' summit in Pittsburgh on Sept 24-25.