Wednesday, July 22, 2009

Lagarde Takes on Goldman Sachs

Christine Lagarde blasted banks that have reverted to their old ways, paying huge bonuses to go-go bankers. To be sure, the French finance minister hopes that France will gain some competitive advantage from its reputation for tougher banking regulation, but she apparently intends to make an issue of the U.S. government's unwillingness to rein in banks like Goldman Sachs:

"We have the rules now. It is not a question of -re-inventing the wheel or procrastinating about them. It is a question of applying a set of rules that have now been agreed by the Financial Stability Board. The utmost priority should be given to their implementation," she said. "If operators are not prepared to play by those rules, then make sure we have prudential rules that strongly encourage them to do so."

Ms Lagarde acknowledged that it was "tough" imposing higher standards on French banks in terms of pay that could put them at a competitive disadvantage in recruitment.

"It is not fair that some players are playing by the rules and that some players - especially when they are highly subsidised - are simply ignoring the rules."

But she said Paris as a financial centre stood to benefit from the enhanced reputation of its universal bank business model - combining investment banking with retail operations - and of its regulatory system, and from London's tarnished image. "I don't think we have been guilty of the same excess, not to say that we have been paragons of virtue," she said.

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