Sarkozy acts on bank bonuses

NICOLAS Sarkozy has confronted the chief executives of the major French banks and announced a crackdown on inflated bonuses and excessive risk-taking.

In his first major engagement since returning from a three-week holiday on Cap Nègre, Sarkozy summoned banking bosses to the Elysée palace yesterday to call for "more transparency, more control and more responsibility".

The meeting – his seventh with the banking sector in less than a year – came after BNP Paribas revealed this month that it had put aside a billion euros for its traders' annual bonuses this year.

Sarkozy is proposing that traders would have to wait three years before they receive the full amount of any bonus to which they are entitled.

He said: "The issue of traders' remuneration is an essential part of ensuring that the crisis we're going through is not repeated.

"But just as we are seeing the first signs of a return to stability, we also see the bad habits resurfacing. I can't accept this."

A trader who earns a bonus in one year would receive part of it upfront - but risks losing the rest of it if he or she loses money in the next year.

About a third of the bonus would also be paid in stock options instead of cash.

Banks would be required to hire a remuneration supervisor to ensure compliance with the rules and to inform shareholders what the company's policy on pay is.

Sarkozy is looking to present his plan on bank regulation to the G20 summit in Pennsylvania next month.

"The problem is international and should be dealt with internationally, but France will not settle for the lowest common denominator, nor will it wait before acting," he added.

"Let us discuss national measures that we can take immediately."

Banking representatives say any new measures must be applied at an international level.

They warn that having capped bonuses only in France would encourage people to leave the country and work for overseas rivals in London or New York.