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French bank tells bankers to pay for their mistakes
Peter Allen in Paris26.08.09
Bankers could lose their massive bonuses and have money deducted from their salaries when investments fail under a radical scheme being proposed by a French financial chief.
The scheme comes amid international outcry against the "rewards for failure" banking culture which many observers say brought about the global economic crisis.
Baudouin Prot, the chief executive of BNP Paribas, France's biggest financial institution, unveiled the so-called "bonus-malus" (Latin for good/bad), scheme at a meeting with president Nicolas Sarkozy yesterday.
Prot said: "Staff will not only be linked to the profits of their banks but also to the possible losses. The difficulty is that this system cannot be put in place in just one country," added Prot, who said it was crucial that the plan was also adopted in countries such as Britain and America.
Sarkozy will encourage fellow leaders - including Gordon Brown - to adopt the bonus-malus idea at the G20 meeting in Pittsburgh, America, next month.
The French want to see two-thirds of traders' bonuses withheld for a period of up to five years.
Bonuses will also be high on the agenda at next week's G20 summit of finance ministers in London.
A UK government source said: "It can't be a return to the old ways of high-risk behaviour by financial institutions."
Reader views (2)
The French are bang on right on this one.
Governments and regulators in all G20 countries need to follow suit or risk taxpayers taking potentially unlawful action against bankers. If all G20 countries act more or less in unison than there is nowhere for bankers to run to for more pay.
Even pretty bone headed, lawyer ridden Governments such as US and UK can act to ensure their taxpayers never carry such a damaging and wealth destroying level of risk again.
If any banker thinks the taxpayer is going to allow status quo and risk picking up the tab next time - think again because, come what may, that will not happen.
- James, South East
The trouble with this scheme is the asymetric loyalty of these banks to their employees. They hire and fire at will but ewant 5 years "loyalty" ? So you get your pay 5 years after you have earned it? In the mean time some other Charlie screws up or you are "fired" and you lose your pay? Utter morons, no one would accept that sort of contract, totally open to top managemenmt abuse and bleieve me they will do exactly that! A non-runner, won't fly in the USA and I doubt the UK. Trading talent will simply move out of the "regulated banks" and set up shop elsewhere. Goldman are acutely aware of it having already suffered the talent drain over the years. Typical "French" idea.....
- James Macleod Ritchie, Oyster Bay Cove
