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Wall Street banks have warned that the next wave of hiring in France could be blocked without restrictions on severance costs for high-paid traders, a flagship measure that was left out of the reform package aimed at strengthening Paris as a financial center.
Paris has emerged as the biggest winner among European cities vying to become Europe’s top financial center after Brexit, and the limits were due to be part of an “attractiveness bill” debated in parliament this week. However, they have not been included for now as the French government and lawmakers seek legal solutions to implement the country’s labor protection laws.
US investment banks such as JPMorgan, Morgan Stanley, Citi, Goldman Sachs and Bank of America, which have hired or moved hundreds of people to Paris since Britain left the EU, have lobbied for changes in recent months, although French banks would benefit. mashed potato.
Some have said their future expansion depends in part on further easing of labor laws, including against traders defined as “key risk takers.”
“We could only really consider going much further in our hiring if French labor rules really adapted to this kind of cyclical business,” said a U.S. bank executive in Paris.
Redundancy payments for traders earning more than 1 million euros a year in Paris can be more than five times those in London, although there is a smaller difference between France and the rest of Europe.
“This is really a measure driven primarily by American investment banks and with the idea that this is really a Paris-London issue,” said Jean-Charles Simon, chief executive of Paris Europlace, which promotes the capital French as a financial center.
Even with the existing larger cap on severance pay introduced by President Emmanuel Macron, “when it applies to people with seven-figure salaries, it creates significant amounts,” Simon added.
Paris’ position as a financial center has been supported by lifestyle arguments in its favor, as well as a favorable tax regime for newcomers. However, some bankers have argued that the rules should be made even more flexible so they can attract people to rival banks in France and not lose the tax benefits.
Wall Street’s biggest banks have moved more than 1,600 people to the French capital and are still growing their operations with dozens of planned hires, with a larger number of financial sector moves outpacing the move to other cities like Frankfurt or Dublin .
The idea under consideration would be to place more specific limits on payments to traders so that they do not exceed the threshold of around half a million euros. However, introducing such limits into the reform package is legally difficult, as it singles out individuals.
One person at an American bank that had to make cuts last year said: “Our critical mass in Paris has increased, but we also have to be able to be responsive.”
Those working on the law are discussing how it could be written as an amendment, including in consultation with France’s Council of State, which provides legal advice to the government. The bill will still have to win approval in the French parliament, where Macron’s party does not have a majority.
Alexandre Holroyd, a lawmaker who is leading the reform package, said France’s labor rules were meant to be protective but were never designed to overcompensate traders.
“A trading floor is a place where there is a lot of volatility and variation in staffing,” Holroyd said. “It’s the flip side of receiving completely disproportionate amounts of money compared to over 99% of people.”
The latest French law on attractiveness goes far beyond the simple question of remuneration. As Britain has done recently, France aims to improve the digitalisation of the trade finance sector. Another measure includes introducing multiple voting rights as part of initial public offerings, so that start-up founders do not have to lose control of their companies, a rule intended to help Paris compete with the likes of Amsterdam for quotes.
Finance Minister Bruno Le Maire visited Wall Street late last year, partly in an effort to convince more investment firms to follow U.S. banks to Paris. It is expected to do the same in the Gulf in the coming months, a French official said.