French banks agree to limit trader bonuses

The Associated Press ,  Paris   |  Mon, 02/09/2009 9:32 PM  |  Business

French banks have agreed to adopt new guidelines reining in the sometimes exorbitant bonuses paid to traders and other financial industry professionals.

The French Banking Federation will present the guidelines soon to French Finance Minister Christine Lagarde, the organization said in a statement over the weekend. They are to be applied beginning this year on bonuses earned in 2009 and paid in 2010, the banking federation said.

Among the guidelines is one stating that bonuses should be calculated based on the profitability of a trader's activities, after taking into account all related costs, rather than on the size of the trader's overall income for the bank or other institution, the federation said.

The guidelines are meant to bring traders' incentives closer into line with the long-term interest of their banks, said the federation, which represents all of France's banks.

It is "indispensable" that the guidelines be adopted internationally if they are to have any affect, the federation added.

Large bonuses at banks and companies seeking government bailouts have been a focus of frustration by taxpayers in many countries.

French President Nicolas Sarkozy announced there would be no 2009 bonuses at banks thathave received state aid. France's top six banks, including giants BNP Paribas SA and Societe Generale SA, are recipients of the country's euro360 billion bank bailout package, euro320 billion of which was in loan guarantees.

The move also comes after U.S. President Barack Obama on Wednesday ordered $500,00 pay caps for executives of firms that accept U.S. bailout money.
 

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