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Wall Street banks doubt the next round of job growth in France would be possible without caps on layoff costs for high-paid traders, a centerpiece measure left out of the proposed reforms aimed at strengthening Paris as a financial center. It warns that it may be hindered.
Paris has emerged as the main winner as European cities compete to become Europe's biggest financial center post-Brexit, with the cap part of an “attractiveness bill” to be debated in parliament this week. It was planned to be. However, these schemes are currently not included as the French government and lawmakers seek legal workarounds under the country's protected labor laws.
US investment banks including JPMorgan, Morgan Stanley, Citi, Goldman Sachs and Bank of America have hired or relocated hundreds of people to Paris since Brexit, and in recent months. French banks, which have led the lobbying efforts for reform, will also benefit. Too.
Some say future expansion will depend in part on further loosening of labor laws, including for traders, who are defined as “key risk takers.”
“Only once French labor regulations are truly adapted to this kind of cyclical activity will we seriously consider hiring further,” said an executive at an American bank in Paris. .
Redundancy benefits paid to traders earning more than €1 million a year in Paris can end up being more than five times as high as in London, but the difference between France and other European countries is not that large.
Jean-Charles Simon, chief executive of Paris Europlace, which promotes the French capital as a financial center, said: “This is a measure driven primarily by US investment banks, and in fact Paris and London It is based on the idea that this is a problem.”
Even the broader cap on existing severance pay, introduced by President Emmanuel Macron, “is significant when you apply it to people with seven-figure salaries,” Simon added.
Paris' position as a financial center has been supported by a lifestyle argument that favors Paris and a tax system that favors new arrivals. Nevertheless, some bankers say the rules need to be made more flexible to avoid losing tax breaks by poaching talent from rival French banks.
Wall Street's biggest bank has moved more than 1,600 people to the French capital, building its operations with plans to hire dozens more, with widespread moves in the financial sector to other cities including Frankfurt and Dublin This exceeds the transfer of
A proposal under consideration would be to set more specific limits on payments to traders, so that they do not exceed a threshold of around 500,000 euros. However, incorporating such a cap into a reform package would be legally difficult because it would identify individuals.
“Our critical mass in Paris has increased, but we also need to be able to respond reactively,” said a source at a U.S. bank that was forced to cut staff last year.
Those working on the law are discussing how to include it in amendments, including in consultation with France's Council of State, which provides legal advice to the government. The bill must be approved by France's parliament, where Mr Macron's party does not have a majority.
Alexandre Holroyd, the lawmaker leading the reforms, said France's labor rules were meant to protect but were never designed to overcompensate traders.
“The trading floor is a place where there is a lot of volatility and the number of employees fluctuates a lot,” Holroyd said. “This goes against the grain of the fact that more than 99 percent of people are being paid a totally disproportionate amount of money.”
France's latest 'attractiveness' bill goes far beyond just remuneration issues. Just as the UK has recently done, France is also aiming to improve the digitalization of its trade finance sector. Another measure includes introducing multiple voting rights as part of initial public offerings, which would eliminate the need for startup founders to lose control of their companies. This is a rule aimed at helping Paris compete with the likes of Amsterdam for listings.
Finance Minister Bruno Le Maire headed to Wall Street late last year, partly with the aim of attracting more investment firms to follow US banks to Paris. French officials say he plans to carry out similar operations in the Gulf in the coming months.
