UPDATE:G20:French Fin Min:Got Reassurance From US On Bonuses

"My U.S. colleague has assured me that the U.S. will be compliant with FSB rules for the next bonus season," Lagarde told reporters after a gathering of finance ministers from the Group of 20 leading economies in Scotland Saturday.

Compensation in the banking sector has been a contentious issue between France and the U.S. going into the G20 meeting in St. Andrews.

France has recently enacted strict regulations framing bankers' pay along FSB guidelines agreed at the last G20 meeting of heads of state in Pittsburgh, which will be applied to bonuses to be paid for the year 2009 at the start of next year.

"Rules that have been agreed on and that are meant to prevent risky behavior have to be applied," Lagarde said.

Guidelines set out by the FSB on remuneration in the financial sector link banks' capital levels to the amount of bonuses they should pay out, in a bid to get them to bolster their capital cushions and avoid a new financial crisis. They also impose bonus deferral for several years, a ban on multiyear bonuses, the obligation to pay a certain amount in shares, and clawback clauses.

The French finance minister had voiced concern about the implementation of such rules in the U.S., fearing the Federal Reserve might take a more relaxed approach to FSB guidelines, distorting competition. These concerns have been further fueled by the return of most U.S. banks to profit in recent quarters on the back of buoyant financial markets.

In an apparent victory for France, the G20 finance ministers' gathering Saturday called for an immediate implementation at a national level of the FSB guidelines on compensation in the banking sector, and it tasked the FSB to report back on implementation of these rules by March 2010.

Lagarde cited general progress on the financial regulation agenda at the St. Andrews gathering, stressing in particular the G20's commitment to further clamp down on non-cooperative centers. She also said she had called on the FSB to make sure that the ongoing revision of Europe's accounting rules would restrict the scope of fair value accounting rather than enlarge it.

Lagarde also welcomed the G20's proposal to study the possibility of creating a tax on the financial sector to fund the cost of future potential bailouts of the banking sector, an idea that was given further clout Saturday by U.K. Prime Minister Gordon Brown's endorsement.

"This is good news," she said, warning that such a tax had to be applied globally to be effective. Asked about the resistance of the U.S. to this proposal, Lagarde said "the idea has to make its way."

Bank of France Governor Christian Noyer said progress had been achieved in establishing a global framework for bank pay despite early skepticism from several G20 nations.

"It's still early days," Noyer added.

-By Nathalie Boschat, Dow Jones Newswires; nathalie.boschat@dowjones.com

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  11-07-091415ET
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