Banker bonuses

Nicolas Sarkozy has been one of the loudest critics of the banking industry and he has now promised to fight for stronger commitments on controls at the next G20 meeting.

"I will not be sparing in my efforts to come up with a European approach on this subject," Sarkozy said.

The issue of market regulation is sure to be high on the agenda at the summit of Group of 20 nations in the US city of Pittsburgh in late September. G20 finance ministers are also meeting in London at the beginning of the month and banking controls are to be one of the top issues on the agenda.

There has been international concern in recent months that bank bonuses have been slowly rising to levels that were equal to those before the global financial meltdown.

"Obviously the question of bonuses cannot be handled by France alone," Sarkozy said. "But that is no reason to sit and do nothing."

"France will propose that all the great financial centers of the G20 adopt the rules for transparency, oversight and responsibility that are now in place on the Paris market," he said.

The issue is also expected to be discussed when Sarkozy meets with German Chancellor Angela Merkel next week.

New restrictions for French banks

Sarkozy announced tougher controls for French banks after meeting with financial executives at the Elysee Palace in Paris on Tuesday.

Sarkozy said that banks would be required to defer two-thirds of bonuses paid to traders over a three-year period and that a third of the payout had to be in bank stocks.

Bankers could also face penalties if they lose money for their companies.

The outrage over the bonuses has been inflamed by concerns that banks are not extending credit to small companies in spite of the large amount of public money that has been put into the financial sector.

"We will not work with banks who do not apply these rules," Sarkozy told reporters after his seventh banking summit since the crisis began.

"I want banks who do not play by the rules to be punished," he added.

The new rules were confirmed by the head of the French banking federation who said that its members had agreed to the new restrictions.

Bonuses at BNP Paribas

The issue of bank bonuses resurfaced recently when it was revealed that BNP Paribas had set aside one billion euros ($1.43 billion) for possible bonuses after it reported a rise of 6.6 percent in its second quarter profits.

Baudoin Prot, the CEO of BNP Paribas, who is taking over as head of the French banking federation, said that French banks would comply with the president's new banking rules, but added that the rules would have to be adopted globally if they were to have a significant effect.

ca/av/Reuters/AFP/AP
Editor: Chuck Penfold