As part of the enforcement of the plan, Sarkozy has appointed a “pay czar,” former French central banker and IMF Managing Director Michel Camdessus, who will monitor the bonuses of the 100 best-paid traders at each bank in France.
In April, G-20 leaders called for curbs on bonuses, to include deferring payments and paying employees on the performance of their banks as a whole. They proposed sanctions where bonuses encouraged excessively risky lending. While France and Germany have both taken steps to reign in top bankers pay, they have expressed concerns that British and US regulators are taking a softer line. German regulators said this month that with effect from January 1st 2009, short-term profits would no longer be used to set bonuses and that there would be clawbacks if deals proved too risky in retrospect.
“It’s too easy to say we’ll do nothing because others aren’t,” Mr. Sarkozy said. “France must lead and try to persuade the others.”
The French initiative has ensured that bankers pay will be on the agenda at the Finance Ministers meeting ahead of the G20 Summit this September. Sarkozy would like to see global bonus limits and sanctions for execive pay for failure and has the support of Angela Merkel. In an N24 television interview on Wednesday the German Chancellor said that bonuses would be a central theme at the G20 meetings, “because it is really annoying that already today bonuses are being dealt with in some banks almost exactly as they were before”.
Critics of the proposals have suggested that Sarkozy and Merkel are pandering to domestic political agendas and that global enforcement of pay caps will be impossible to achieve. However it is likely that there will be global backing for some of the new French rules because they mirror many of the elements of what countries like Britain have already agreed on, such as the deferral of parts of a bonus and the mix of cash and shares.