President Nicolas Sarkozy summoned the heads of France's biggest banks on Tuesday as he steps up pressure for tighter controls on traders' bonuses ahead of meetings with the Group of 20 nations next month.
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.
"This is a very big meeting because it's going to sum up the position on the rules established at the meeting in London ahead of Pittsburgh," Budget Minister Eric Woerth told i-tele television before the bankers' appointment with Sarkozy on Tuesday afternoon.
"The whole international financial community, all the well-established international banks, have to regulate variable compensation levels that are often indecent and incomprehensible," he said.
French banks adopted a code of good conduct based on broad G20 guidelines in February in exchange for receiving billions of euros in liquidity support from the government aimed at ending huge guaranteed bonuses.
But the debate in France was rekindled earlier this month when it emerged that BNP Paribas, had set aside 1 billion euros ($1.43 billion) for possible bonuses after reporting a 6.6 percent rise in second quarter profits.
PRESSURE
There is heavy political pressure in France for action, particularly given 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.
The bankers met Economy Minister Christine Lagarde for preparatory talks on Monday.
But apart from personal pressure, it is unclear what concrete restrictions Sarkozy will be willing to impose given the risk of seeing traders decamp en masse to London or other cities, undermining Paris as a major financial centre.
France banned stock options in pay packages for companies receiving state support until the end of 2010 but has not yet threatened to regulate bonuses, instead pressing for more transparency.
"It doesn't mean we have to put an end to market activities, it doesn't mean that French trading rooms have to be emptied in order to fill up British trading rooms," Woerth said.
"But it means there can't be completely unexplained, inexplicable bonuses," he said.
Britain has threatened legislation if bankers do not change their ways, but all countries have been held back by concerns that if they crack down too hard, others will draw the benefits.
"These rules have to be respected in France but they also have to be respected in Germany, in Italy, in the United States, everywhere in the world," Woerth said.
