The bosses of two of France’s biggest banks renounced their bonuses on Tuesday, bowing to pressure from President Nicolas Sarkozy to curb generous salary payouts during the financial crisis.
Economy Minister Christine Lagarde told parliament that France was ready to offer more state aid to the banking sector on condition that banks limit dividend payments to shareholders and ban executive bonuses. Shortly afterward, Societe Generale and Credit Agricole announced that their chairmen and chief executives would not receive bonuses for 2008, following a similar decision by rival BNP Paribas.
Sarkozy met bank chiefs in Paris during the day to discuss the battered financial system, and urged them to earmark more funds for lending activities to help the economy recover. Lagarde told reporters later that the bankers had made “very clear” commitments, but did not give further details.
France has already made €10.5 billion ($13.63 billion) in loans available to banks to boost their capital base and is preparing to offer a similar-sized second round of loans shortly.
“This is not a present to the banks; it’s because capital requirements have been strengthened, and we have to strengthen capital if we want to help the economy,” Lagarde said. She said banks accepting aid from the second tranche would have the option of offering either subordinated loans or non-voting preference shares, neither of which would give the state direct management control.
In addition, they would have to recommit to increasing loans and accepting limits on stock options and other compensation. They would also have to increase the return on bank equity capital, “that’s to say, to limit the dividends paid to shareholders,” she said. “Secondly, (they would have) to stop paying bonuses to senior managers,” she added. “It’s very clear. These are not intentions; these are actions,” she said. (Reuters)