France will require all banks receiving the next tranche of state aid to limit the amount of dividends paid to shareholders and to eliminate bonuses for executives, said Economy Minister Christine Lagarde in the French Parliament.
After already granting banks access to loans amounting to €10.5 billion to strengthen their capital base, France is preparing to offer another tranche of state aid to the struggling banking sector soon. “This is not a gift to the banks, but a consequence of tightening conditions on bank capital. If we want to help the economy, that capital needs to be strengthened,” Lagarde said. Her statement preceded a meeting of President Nicolas Sarkozy with bank leaders in Paris.
Sarkozy has already called on bank leaders to forgo bonuses, to which only BNP Paribas, the largest French bank whose shares are listed on the stock exchange, has so far responded positively, while others claim that decisions regarding executive salaries must be made by their supervisory boards. Banks that accept aid from the second tranche of the government package will have the option to offer favorable loans or preferred shares without voting rights, neither of which will give the state direct managerial control over the banks, Lagarde said. Furthermore, banks will again have to commit to increasing the availability of loans to the economy and accept restrictions related to stock options and other forms of compensation. An additional obligation is the limitation on dividends that will be paid to shareholders, she emphasized. (H)
