In order to strengthen Paris as an attractive option post-Brexit, the parliament passed Amendment n°372 on November 23rd, which aims to reduce the financial risk in dismissals decided by credit establishments and management companies in France.
This amendment consists of two components:
- The first component concerns the exclusion of deferred or recoverable bonuses received relating to the category consisting of risk takers (traders) from the calculation of the legal severance pay, and the potential damages granted by a judge in the case of dismissal without real or serious cause.
Of course, these bonuses do not constitute as salaries for “risk takers”. Yet, they were up until now included in the calculation of the severance pay, which increased the latter significantly, at the expense of credit establishments and management companies. Excluding these bonuses from the severance pay calculations will, without a doubt, be well received by banking establishments. Indeed, the amount of the severance pay received by the traders, which is considerably higher in France compared to our Europeans partners, was previously a competitive disadvantage for France. It represented a source of hesitation for banking establishments when deciding to potentially set up a branch in France.
- The second component of the amendment aims to enable the recovery of the “risk takers’” bonuses that were already allocated to them, in the case of a poor investment in the long-term.
According to Muriel Pénicaud, the Minister of Labor, these bonuses will from now on serve as a kind of advance that the employer could recover if the investment proves to not be judicious. This will encourage the people who make these decisions to have a medium and long-term vision of their investments, thereby penalizing a short-term approach.
These components make up two attractive qualities for credit establishments and management companies and is in line with one of the objectives of the French government: to make Paris a leading financial center.
The future establishment of the headquarters of the European Banking Authority in the French capital, decided upon this past November 21st, adds to this evolution.
The firm NMW Delormeau has the necessary teams, including a department of banking and financing law, to accompany banking establishments in their installation in France. We can provide all the advice desired, notably regarding banking regulation or regulation formalities.