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Sarkozy lays down gauntlet with reformist speech at Davos

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Sarkozy targets banks
  • Nicolas Sarkozy tells Davos "globalization skidded out of control" in finance crisis
  • Sarkozy tells delegates that he backs Obama bank reform plans which may break up some institutions
  • Sarkozy: Risks are too great if "we do not change the regulation of our banking system"
  • Banking chiefs have warned of the risks to the wider economy of more regulation

Davos, Switzerland (CNN) -- French President Nicolas Sarkozy walked into the lion's den of capitalism in Davos Wednesday and rammed his message of reform down the throats of the world's bankers and chief executives.

In his keynote address to the 2010 World Economic Forum (WEF), the French leader said globalization skidded out of control and that a complete rethink of the capitalist system was required.

As he slammed excessive bank bonuses -- one of the most explosive issues for many people -- he endorsed a reform plan from his U.S. counterpart Barack Obama that includes limits on the size of banks, curbs on rewards and restrictions on riskier trading.

"He's throwing down a gauntlet from France's point of view from what he believes France will accept," said CNN's Richard Quest.

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"And furthermore the president is saying if others don't do it, France will still do it."

But Richard Edelman, CEO of Edelman, one of the world's largest PR firms, told CNN "people don't want state capitalism, they want enlightened capitalism. That means trust, transparency plus quality products. It's not just about making the numbers or having a charismatic CEO anymore.

"The fact is we have to have metrics beyond the numbers of EPS (earnings per share). We have to say 'OK, here are our eco goals' or 'here is our employment in the community.'

"We have to have different numbers that we're putting forward, not just the bonuses. That's the thing that's sticking in people's heads."

Barclays investment banking chief Bob Diamond warned that more rules would simply drive banks out of financial hubs such as London and New York.

He told delegates at a session of the WEF that "without risk we do not have a banking industry... Having banks that are well-managed and willing to take risk, and especially willing to take cross-border risk, is essential if we want to have jobs and economic growth."

But does any of what President Sarkozy says really matter?

"It does matter," said Quest. "The question of the future role of capitalism, the question of what rules will be acceptable is being debated at the moment globally.

"So I think this will be one of the speeches we'll look back on."