President Nicolas Sarkozy said Tuesday that France will refrain from hiring banks that refuse to accept government limits on compensation.
"From now on, France will give no mandates to banks that don't apply these rules," Sarkozy said after meeting with French bank executives in Paris. He did not differentiate between international institutions and those based in France. "It is possible to change the rules of financial capitalism."
Top French bankers were summoned to Sarkozy's office to set new rules on pay in the wake of the financial crisis. After the meeting, Sarkozy said the executives agreed to limits, including deferring two-thirds of bonus payments and paying one-third in shares.
Sarkozy said he will bring his proposals to the gathering of world leaders at a Group of 20 leaders meeting in Pittsburgh next month.
At the summit in London in April, the group promised tighter rules on pay for bankers.
According to a text of Tuesday's remarks released by his office, Sarkozy said: "I will fight in Pittsburgh to amplify the commitments made in London. The problem is global and has to be treated globally. France won't accept the most minimal position or wait to act."
Sarkozy also said he wants the G-20 to consider capping the total amount paid out by banks in bonuses and to consider setting limits on the size of individual bonuses.
Bankers who met Sarkozy on Tuesday included BNP Paribas SA Chief Executive Baudouin Prot, Societe Generale SA Chief Frederic Oudea, Credit Agricole SA CEO Georges Pauget.
Prot said after the meeting that he planned to set aside 500 million euros ($716 million) in first-half bonuses for its 17,000 investment bank employees.
That amount excludes staggered bonus payments to be paid at a later date, Prot said.
Speaking as the head of the French banking association, Prot also said that banking companies will adopt a so-called bonus/malus incentive system for trader pay and that bonuses would be linked to future performance.
Analysts say the meeting of G-20 leaders next month in Pittsburgh could have sweeping ramifications. "It's a major meeting," French Budget Minister Eric Woerth said on I-Tele. "All the international banks will have to regulate variable remuneration."
Governments around the globe are grappling with public demands to limit rewards for bankers after risk-taking in the financial services industry triggered market turmoil and bank bailouts.
Sarkozy is working with officials in Great Britain and the United States to apply new rules globally to avoid putting any one nation at a competitive disadvantage.
"We have to set an example," Woerth said Tuesday. "France cannot lead G-20 and then wait for the others to act."
Getting all of the G-20 nations to agree on a common rulebook is proving more difficult as the economy recovers and competition for talent in the financial industry heats up.
In Britain, Chancellor of the Exchequer Alistair Darling signaled last week that he may change U.K. laws to curb bonuses after regulators watered down rules proposed in February.
In the United States, the Treasury Department is reviewing compensation of top executives at seven companies that received aid from the government. Kenneth Feinberg, President Obama's adviser for executive pay, has 60 days to review pay plans, the Treasury said Aug. 14.
Seeking to avoid a cap on bonus payments, French banks may propose reinforcing their pay committees,
French Finance Minister Christine Lagarde said last week that the government may seek a ban on guaranteed bonuses.