PARIS -- France pledged to limit guaranteed bonus payments to bankers on Monday as a backlash against seven-figure pay packages in the industry builds on both sides of the Atlantic.
French Economy Minister Christine Lagarde said she would act against policies that encourage excessive risk-taking after Britain said it was prepared to take a tougher stance and a U.S. "pay czar" steps up his scrutiny on pay deals. A public and political backlash against bonuses has flared across Europe after anecdotal evidence that banks are paying out millions of dollars to lure and retain top staff.
Britain's Barclays is attempting to recruit five JP Morgan investment bankers with a bonus package worth up to 30 million pounds ($49.2 million), according to media reports, and other banks are offering lucrative deals to woo talent.
French President Nicolas Sarkozy will next week discuss pay in meetings with finance heads, following an outcry earlier this month after reports that BNP Paribas had set aside 1 billion euros ($1.4 billion) for possible bonus payments.
Authorities in Europe and the United States are stepping up moves to rein in attempts by financial institutions, including recipients of state bailouts, to return to the bonus culture that was blamed for the excessive risk-taking that underpinned last year's market crisis.
Lagarde told France Inter radio on Monday: "We must absolutely go further and put an end to these excesses and these abuses which public opinion will not put up with and which also provide an incentive to risk-taking."
The heads of some of France's largest banks are due to meet Lagarde and economy ministry officials on Monday next week ahead of a second meeting with Sarkozy on the following day.
The UK government said it is prepared to tighten the laws on bankers' pay and bonuses if companies continue to reward excessive risk-taking.
"If we need to change the law and toughen things up, we can do that," finance minister Alistair Darling told the Sunday Times at the weekend.
Last week a U.S. judge refused to approve a proposed settlement between regulators and Bank of America Corp (over bonus payments to Merrill Lynch employees, saying it lacked transparency and he could not determine if it was fair to the public.
Lagarde said the principle of guaranteed bonus payments was "unacceptable", and joined calls for countries to work together for a coordinated response.
Banks can offer guaranteed bonuses, sometimes stretching for a number of years, to woo star performers who stand to lose payments already agreed with their previous employers.
Britain's financial regulator last week set out new guidelines on pay and banned guaranteed bonuses of over a year. But it was slammed by politicians for not going far enough to prevent a repeat of pay policies that helped cause the recent financial crisis.
The Group of 20 (G20) leading world economies agreed in April on a broad set of principles on bankers pay, saying it expected "material progress" by the 2009 bonus round. Progress will be reviewed at a summit next month in Pittsburgh.
Several finance chiefs have warned against an overreaction by politicians to the issue, however.
"The populist assault on bonuses has already produced some bizarre results, such as some banks increasing basic salaries in expectation of not being able to pay bonuses," said Terry Smith, chief executive of interdealer broker Tullett Prebon.
"This unintended consequence of the bonus assault is ridiculous."
The building pressure in Europe came as a U.S. compensation chief prepares to step up his scrutiny of top paid staff at seven big U.S. companies helped by taxpayer cash.
Kenneth Feinberg told Reuters on Sunday he has broad and "binding" authority over executive compensation, including the ability to "claw back" money already paid, and he is weighing how and whether to use that power.
He has been consulting with companies that have yet to pay back money they borrowed from the government, including Citigroup and Bank of America. The companies had until Friday to submit details about the pay of their top 25 employees
© 2022 Newsmax. All rights reserved.