Belgium: Financial Sector Bonuses Shrouded in Silence

UNCLAS BRUSSELS 000472

SENSITIVE

NOFORN

SIPDIS

STATE FOR EB/IFD, EUR/ERA AND EUR/UBI
Treasury for OASIA/OIN - Atukorala
USDOC FOR 3133/USFCS/OIO/EUR

E.O. 12958: N/A
TAGS: EFIN EINV ELAB BE
SUBJECT: Belgium: Financial Sector Bonuses Shrouded in Silence


1. (SBU) SUMMARY: While most countries in Western Europe are
vigorously debating the pros and cons of large banking bonuses, no
such discussion has been taking place in Belgium. The involvement
of quasi-public banks Dexia and Ethias is one reason why politicians
have treaded delicately until now; both banks have traditionally
been considered outplacement offices for politicians near the end of
their careers. But the lack of much of an outcry - political or
public - is also because large bonuses are quite uncommon in the
Belgian banking system, where most people favor fixed over variable
salary arrangements. A high bonus for a top manager of Fortis Bank
appears to be more the exception. Finally, in the small world of
Belgian finance, many lips are sealed - few financiers care to talk
on a sensitive issue at a sensitive time. End summary.


2. (SBU) While the severance payments of several top Fortis
managers certainly drew some criticism mainly from the socialists
in the Belgian parliament in recent months, neither political nor
public anger ever reached the levels witnessed in other countries.
Former Prime Minister Leterme did intervene to reduce the 5 million
euro golden handshake of former Fortis CEO Verwilst to 800,000
euros, but the Government had to admit defeat after failing to block
the 4 million euros netted by Fortis Chief Financial Officer
Mittler. And when Fortis management approved the bonuses of 2,000
employees just hours before the takeover by BNP Paribas, the
decision hardly made the headlines.


3. (SBU) Although 20 billion euros in taxpayers' money went into
the rescue of Fortis, Dexia, Ethias and KBC, it was only in the case
of KBC that the Flemish regional government enforced limits to
bankers' bonuses. The federal government never discussed the issue,
and even some members of the opposition termed bonus criticism 'a
higher form of populism'. For a variety of (mainly fiscal) reasons,
Belgians traditionally are very discreet about personal income
issues, and general believe that people who live in glass houses
should not throw stones - no one wants to rock the boat. To date,
most of the Belgian banks have refused to comment about their bonus
system. The propensity for politicians at least to stay quiet is
furthermore compounded by the fact that not only Dexia and Ethias
but also Fortis and KBC will now even more than ever have
politically appointed board members, given Belgian and regional
government assistance. No Belgian politician wants to shoot himself
or herself in the foot on this potentially lucrative issue.


4. (SBU) According to labor market specialist Jan Denys of
Randstad, Belgians largely prefer fixed over variable salary
arrangements, and as a result, large banking bonuses as witnessed
abroad are quite uncommon in Belgium. The salary of three quarters
of the banking personnel is governed by collective wage agreements
negotiated between the trade unions and the employers. As a
consequence, only banking top management is rewarded with a bonus,
without - as far as we know --ever reaching the levels witnessed
abroad.

Bush