French Finance Minster: Beware of 'Banks on Steroids'

Christine Lagarde, Finance Minister of France, has spoken of her concern that some of the world's major banks are "on steriods" as a result of the massive amounts of public money they have received during the global financial crisis.

Ms Lagarde, Minister of Economic Affairs, Industry and Employment is her full title, is fearful that competition in the financial sector has diminished as both investment banks and retail banks have folded as the financial crisis continues. With those banks that have not folded often increasing in size it is a situation that has led Ms Lagarde, the first ever female to be a Minister of Economic Affairs for a G8 economy, to speak of institutions that are "on steroids, relying on public money". The BBC quotes Ms Lagarde as saying:

Look at investment banks in the United States where, before the crisis, there were about six. Today there are about three. I believe that all that doesn't happen without some effect on competition and abusive behaviour

Addressing a press conference in Brussels, where a meeting of EU finance ministers is taking place, she also made mention of the large number of retail banks in the U.S., that number now exceeds 100, that have gone bankrupt or have sought protection from their creditors. As Bloomberg reports Ms Lagarde, appointed to her current position in June 2007, has requested that Mario Draghi , the Governor of the Bank of Italy who serves as the Chairman of the Financial Stability Board, investigate if competition in the banking sector is indeed being undermined as some of the extant banks are seemingly "in the process of forming oligopolies for certain products in certain markets". The impact of the possible lack of competition on the pay of bankers is another issue that needs to be clarified she has said. Formerly the Financial Stability Forum, and then only an advisory body, the Financial Stability Board was established in April at the G20 summit in London. Its Chairman Mr Draghi is due to report in March 2010 on how implementation of G20 proposals on such as limits on bankers' pay and banks' capital levels is progressing. According to Bloomberg since the global financial crisis began two years ago various governments have provided more than $400 billion in support to the banking sector, which has seen credit losses and write-downs totaling $1.7 trillion. Under pressure from the French government, which has been highly critical of the bonus culture, the country's banks have agreed to be more conservative in their payouts. It remains to be seen how many, if any, bank staff decide to move out of France to a country where the bonus structure has changed little from what it was prior to the global financial meltdown.