RTTNews - French Finance Minister Christine Lagarde said those banks, which resumed paying guaranteed bonuses to their staff are an absolute disgrace and should be reined in by governments at the Group of 20 summit in September, the Financial Times reported Wednesday.
I think it is an absolute disgrace that guaranteed bonuses of several years could still be paid, or that some people are thinking of reinstating the old ways of compensating with insufficient relationship between compensation and lasting performance and risk management, Lagarde said in an interview with the Financial Times.
According to the newspaper, Lagarde urged other G20 governments to stop procrastinating and introduce curbs on pay practices deemed to encourage risk-taking.
She said some global banks have offered multi-year guarantees to recruit and retain staff, although they insist the practice has been limited to top talent.
French banks have agreed to forgo such payments, to link bonuses to long-term profitability and include claw-back provisions. If they do not comply, they face the possibility of higher capital requirements, she said.
The global financial crisis that had its epicenter in the U.S. revealed the fragility of the banking system on a macro level. Paying bonuses for those taking financial risks to make profits amid the crisis have been widely criticized.
U.K.'s Financial Services Authority this week issued a warning for banks that guaranteed bonuses for more than a year risked heavy penalties.
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