The French bank chief fighting back against hostile politicians

 
Tim Wallace
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FRANCE has never been the friendliest country for bankers to work in. Its suspicion of capitalism and enduring official support for a short working week don’t make for a natural fit with the fast-paced world of high finance. Hence many of the country’s best and brightest have moved to more welcoming shores.

But Société Générale’s chief executive and chairman Frédéric Oudéa is being squeezed badly even by French standards. Yet he is refreshingly outspoken, more so than many of his UK counterparts.

The financial transactions tax (FTT) being imposed by many Eurozone nations and a proposed bonus cap are the latest signs of policymakers’ desire to bash the sector, and, Oudéa believes, will simply harm the rest of the economy with no gain for anyone.

“France and Europe need to attract investment from the world. We are in a mature market and the demographics are not dynamic so we need to be more attractive for entrepreneurs and investors to be competitive. We need to attract more money, more finance from outside Europe and the FTT is contradictory to that aim. It will destroy activity.”

Eleven countries across the EU want to levy a charge on trades of equities, bonds and derivatives across the world, as long as one party comes from those countries or the security traded was issued there.

“This will push money into US and Asian assets and have a detrimental effect on European economies.”

Oudéa is equally upset that the policies are badly aimed – that politicians say they are trying to hit bankers and claim they will pay for the financial crisis, but in fact fail to understand how the industry works.

For instance the FTT will hit customers more than banks, with investors like pension funds set to bear the brunt of the charge. And it is not even bankers who carry out most of the trading in equities, bonds and derivatives.

Then the bonus cap seems to forget both how much has changed since the crisis, and the global context in which European banks operate.

“There is vast deferral of bonuses. They are largely paid in shares and there is the capacity to claw them back – if you make a big mistake in a bank, you will get nothing,” he explains.

And in any case, “I am accountable to shareholders – I cannot simply pay big bonuses for their own sake.”

On top of that, the bank competes globally and so would be hamstrung by pay rules that applied only in Europe, and it competes for talent domestically with other finance firms like hedge funds and private equity houses who would easily be able to outbid banks if a cap of one-times salary was put in place.

“I’m not sure this political decision makes sense,” he says.

To cap it all, the anti-capitalist rhetoric of policymakers may ironically lead to a greater reliance on the capital markets, he argues. The Basel III rules mean banks have to set aside more capital against loans to firms, limiting the amount of credit they can extend and so pushing more firms towards issuing debt – a widespread practice in the US, but something European firms are traditionally less comfortable with.

“This means we are moving more towards the Anglo-Saxon model, finding more ways to raise finance,” he argues – not a description those crafting the new rules for banks may be happy to hear.

More than five years on from the crisis there is little hint of the pressure slackening, and as scandals like Libor-rigging keep the spotlight on the banks – Oudéa declined to comment on the specifics of the €300m SocGen last week set aside for litigation – the dangerous popularity of political banker-bashing is set to continue plaguing the industry. “It is unpleasant to live as a banker in this environment,” Oudéa concludes simply.