France becomes first country to curb bankers' bonuses



Rogue trader: Jerome Kerviel lost his bank £3.5 billion

France is to become the first country in the world to limit bankers’ bonuses.

It comes a year after a Paris-based trader lost £3.5 billion in illegal deals.

At one stage Jerome Kerviel was staking as much as £50 billion on behalf of Societe General - more than the bank's net worth.

Worldwide economic collapse and the credit crunch followed soon afterwards, with all countries now looking at ways of curbing the excesses of those working in financial institutions.

French finance minister Christine Lagarde wants a ‘code of ethics’ aimed at capping the bonuses paid to dealers like Kerviel.

The agreement - between France’s banks, its market watchdog and its treasury and banking authority - would take affect as early as this year.

It would apply to bonuses paid in early 2010, stating that ‘the practice of awarding guaranteed bonuses not linked to performance should be banned.’

A bank’s real financial health, as opposed to future profit projections, should be used to determined the size of any bonuses paid, the report says.

A Finance Ministry official confirmed Mrs Lagarde will receive a report addressing financial sector salaries ‘in the coming days.’

The official declined to give any further details because the report has not yet been received.

On Thursday, President Nicolas Sarkozy announced there would be no 2009 bonuses at banks that have received state aid.

Crackdown: France's Economy Minister Christine Lagarde wants a new set of guidelines governing the bonuses and salary structures of traders

France’s top six banks, including Societe Generale and other giants like BNP Paribas, have received a £360 billion bailout package, £320 billion of which was in loan guarantees.

On Wednesday, U.S. President Barack Obama ordered $500,000 pay caps for executives of firms that accept bailout money.

Kerviel, now 32 and working as an IT consultant in Paris, faces charges of breach of trust, fabricating documents and illegally accessing computers.

He could be jailed for three years and fined £300,000 when he finally goes on trial next year.

His former employers at Societe Generale insist they had no idea he was running up such massive losses.