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SINGAPORE: Better regulation is needed to curb excesses among large financial institutions, according to French Finance Minister Christine Lagarde.
As global markets rebounded, some top global financial firms which had received massive government bailouts are handing out large bonuses to staff.
To prevent this from recurring, the French minister said there should be better regulation.
There has been a huge shakeup in the financial sector over the past year. Some institutions have had billions of dollars in government bailouts, while others were left to fend on their own.
And now that the worst of the storm has passed, the French finance minister said it would not be fair if those which had received aid abused their position.
She said: "It would not be acceptable from a level-playing field point of view if some of the banks, having had the benefit of stimulus bailout plans could be able to run faster, be more agile, and have more compensation to offer to some of their operators.
"I've seen evidence of that in some instances in some places in the world, where rescued banks could simply do away with some of the rules of the compensation packages, bonuses of a magnitude, or duration that leads me to believe that they are not competing on a fair level playing field."
In recent months, some of these major financial institutions announced that they were setting aside billions of dollars for bonus payouts. According to the French minister, better regulation is needed to prevent such events from recurring.
She noted that it was necessary for governments to step in last year because failure of the institutions would have caused even deeper pain.
She said: "Size is not the only thing that matters when something is of such significant importance that it cannot be allowed to fail. It is not necessarily because it is bigger. It could be because it has taken risk positions that are exposing lots of other players on the market.
"Think for a second about Northern Rock or Lehman Brothers - they were not that big and yet it was not acceptable to let them fail. Because it wasn't acceptable for the UK banking authorities to have a bank run, and it wasn't for stability and security purposes to let Lehman fall, and yet, Lehman which was not that big should not have been allowed to fail."
Going forward Minister Lagarde said that the coming year will be tough, with growth in Asia on one hand, and rising unemployment and slower growth in US and Europe on the other. - CNA/vm
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