German cabinet agrees conditions for bank rescues
BERLIN (Reuters) - Germany's cabinet on Monday approved strict conditions for banks that make use of its 500 billion euro ($674 billion) rescue package, including limits on managers' salaries, bonuses and severance.
Berlin had unveiled the broad outline of the package a week ago in a coordinated move with other European countries designed to restore confidence in a battered financial sector.
The German plan was approved by lawmakers on Friday, but Chancellor Angela Merkel's cabinet met on Monday to set the conditions banks taking part in the scheme will be subject to.
A Finance Ministry spokesman confirmed the cabinet had backed the requirements, which include "appropriate" compensation for managers.
The cabinet, comprising Merkel's conservatives as well as Social Democrats who rule together in an awkward "grand coalition," agreed that salaries above 500,000 euros per year would be considered inappropriate.
"The criteria for appropriate (remuneration) are based on responsibilities and personal performance, business conditions and the success and outlook of the company compared to others in its field," the provisions agreed by cabinet stated.
Banks participating in the scheme would also be forced to scrap severance and bonus schemes that were deemed inappropriate and would not be able to pay out dividends while they were using government rescue funds.
RECAPITALISATION CAP
Each bank will be allowed recapitalization of up to 10 billion euros and the fund will assume risks of up to 5 billion euros per bank.
The government rescue package is composed of as much as 400 billion euros in guarantees to help banks with liquidity problems and up to 100 billion euros in funds for the recapitalization of struggling financial institutions.
German banks have been reticent about stepping forward to accept government funds for fear such a move would send the wrong signal to hypersensitive financial markets which have been quick to punish the weak.
But over the weekend, Bavarian Finance Minister Erwin Huber suggested the German state's public sector bank BayernLB BAYLB.UL was likely to make use of the package.
Commerzbank (CBKG.DE) CEO Martin Blessing said his bank would also take a close look at using government funds, but Deutsche Bank (DBKGn.DE) CEO Josef Ackermann appeared to rule out such a move.
(Additional reporting by Gernot Heller)
(Writing by Noah Barkin, Erik Kirschbaum, Madeline Chambers; editing by Tim Pearce and Victoria Main)
