U.S. to detail pay limits at banks getting gov't funds

WASHINGTON (Reuters) - The U.S. Treasury Department plans to soon release further guidelines on executive compensation restrictions at banks receiving government funds, according to a document obtained by Reuters on Friday.

The draft government document about the capital injection program for banks said the deadline for all institutions to participate in the Capital Assistance Program (CAP) was being extended to June 8.

It also said CAP recipients will be restricted "from pursuing cash acquisitions of healthy firms until the government investment is refinanced."

Regarding executive compensation restrictions connected to CAP, the document said: "The Treasury's regulations will provide further clarity around executive compensation. These details are expected to be released soon."

The document is a draft version. A completed version is expected to be released by the government later on Friday.

The CAP is a new version of the Capital Purchase Program (CPP) that was launched last fall and designed to inject $250 billion into the nation's banks. The new CAP follows the stress tests the government conducted on the nation's 19 largest banks to determine how much of a capital buffer they need to weather a further deterioration in economic conditions.

The results of the stress tests, released on Thursday, showed 10 of the 19 banks need an additional capital buffer, but the government said most of the banks can achieve the capital targets through private sources.

The deadline for CAP applications coincides with the deadline for those 10 banks submitting capital recovery plans to the government.

The draft document said the CAP will generally be available to any U.S. bank holding company, financial holding company, insured depository institution and savings and loan holding company.

But the CAP will also come with restrictions on dividends, stock repurchases, acquisitions and possibly executive compensation. Many of the restrictions tied to the CPP have prompted firms to want to repay the government money, saying the limits were too onerous.

The document says banks receiving CAP must submit a plan "for how they intend to use the capital to increase lending activities above levels relative to what would have been possible without government support."

They also must participate in the government's home loan modification plan, the document said.

(Reporting by Karey Wutkowski with additional reporting by Patrick Rucker, editing by Gerald E. McCormick and John Wallace)