Economy & Trade, Europe, Financial Crisis, Headlines

ECONOMY: Bonuses Rise With Losses

Julio Godoy

BERLIN, Aug 10 2009 (IPS) - European banks are back to paying high bonuses to managers despite their heavy losses. But this time most of the money is coming out of taxpayers’ pockets.

Germany’s Commerzbank, saved last year by a 18.2 billion euros (25 billion dollars) state bailout, has announced losses adding up to more than 1.6 billion dollars in the first half of this year. But the bank, in which the German government took a 25 percent share, has announced also that it will pay unspecified bonuses to staff.

A Comerzbank spokesman said the payments being described as bonuses were only “performance-related flat payments.” The spokesperson denied that the bank will pay “bonuses” this year.

Several other state-owned regional banks – which received public money to be saved from bankruptcy – are also paying big bonuses to top executives, often by way of increased salaries. The German government approved a rescue package worth 470 billion euros (650 billion dollars) in February to save the country’s banks from insolvency.

The payments have again fuelled debate on responsibility, or the lack of it, among financial operators who campaigned for state rescue plans for their banks, but pay themselves huge salaries and bonuses in the face of their now proven mismanagement.

At a press conference Aug. 6, German finance minister Peer Steinbrueck urged regional authorities to ensure control over salaries to executives at local banks “which have received state guarantees and capital to support their operations.”


Steinbrueck said “some managers and directors continue to live in a fictive world. They did not hear the warning bang (of the crisis). They do not realise that they are responsible for the loss of credibility of our economic system.”

In France, the private Banque Nationale de Paris Paribas (BNP) says it has earmarked a billion euros for bonuses for its executives this year. Last year the BNP received 5.1 billion euros from the government by way of rescue.

Marc Cohen Solal, leader of the General Confederation of Labour (CGT, after its French name), one of France’s largest unions, told IPS he was “surprised to learn that the French banks are still operating with the same directives that led to the crisis. It is very alarming.”

The association SOS Petits Porteurs (‘Small Shareholders’) has demanded that the BNP first “reimburse the aid it received from the taxpayers.”

As in Germany, the French rescue plan for banks was tied to a ban, or at least a cap, on bonuses for financial operators who had encouraged risky investments or speculative transactions. This was in line with the recommendations at the G20 summit in Washington in November last year.

The recommendations from the G20, a grouping of industrialised and major developing economies, are being ignored, despite the continuing financial crisis. And despite the warnings, some banks are going down the speculative path again.

Joseph Ackermann, CEO of Deutsche Bank, has announced a target of 25 percent net profit this financial year, which bank experts say is unreachable without risky speculative operations.

In an interview with the French daily business newspaper La Tribune, Baudouin Prot, BNP general manager, said Friday that “on the question of bonus payments, we were one of the first international operating banks to scrupulously apply the G20 recommendations.”

Government leaders, and most people, seem unconvinced. French finance minister Christine Lagarde has called the payment of bank bonuses at this stage “an absolutely shameful return to old practices.”

 
Republish | | Print |

Related Tags



self love books pdf