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France: Fixing the Financial Sector

Maria Bartiromo interviewing French Finance Minister Christine Lagarde
CNBC.com
Maria Bartiromo interviewing French Finance Minister Christine Lagarde

Fixing the financial sector. It's been the focus of countries worldwide over the past year. It was also one of the key topics at the G20 meeting in Pittsburghlast week.

French Finance Minister Christine Lagarde stopped by the Clinton Global Initiativeto talk about the state of the banking sector in an interview with Maria Bartiromo. "Banks may need to increase their capital reserves in response to regulatory changes being considered by Group of 20 countries," Lagarde told Bartiromo.

France is pushing for rules that would adjust capital requirements on banks, depending on their level of risk.

Under such rules, lenders like BNP Paribas that have retail depositors wouldn't face the same capital requirements as competitors that focus on investment banking alone. "We need to supervise them, we need to make sure they have sufficient capital, we need to make sure they're not taking on too much risk and that they're not rewarding employees for taking on extra risk," Lagarde said.

During the run-up to this week's G20 meeting, French President Nicolas Sarkozy has vocalized demands to clamp down on banks and their pay practice. According to Lagarde, it's critical banks are not driven by short-term benefits. They should be responsible for their actions and compensation policies should be aligned with the risks that are tolerable." As for the French economy, Lagarde said, "in many ways we're out of the recession but not out of the crisis. The crisis will be over when the economy is creating jobs and when we've regulated the financial sector."

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