October 21, 2008 / 8:28 PM / 11 years ago

Dutch detail bank guarantee plan, executive pay curbed

AMSTERDAM, Oct 21 (Reuters) - Banks participating in a Dutch loan guarantee plan to unfreeze credit markets have to pay a fee of at least 50 basis points and limit severance and bonus payments, the Dutch Finance Ministry said on Tuesday.

A total of 200 billion euros ($264 billion) of loans can be guaranteed, the ministry reiterated. It announced the guarantee plan last week.

Depending on the credit worthiness of the banks, fees will be based on historical credit default swaps or estimates of these, plus 50 basis points, the Dutch Finance Ministry said in a statement.

Fees will be 50 basis points for loans with a maturity of less than a year and loans denominated in US dollars and British pounds are also eligible under the program, the ministry said.

Managing or executive directors of banks participating in the loan plan will see any severance payments limited to one year’s fixed salary and banks need to agree on additional requirements on corporate governance with respect to bonuses.

A bank’s executive might not get a bonus, as happened to ING ING.AS executives when the Dutch financial services group agreed to a 10 billion euro cash injection from the Netherlands, a Finance Ministry spokesman said.

Deutsche Bank (DBKGn.DE) last week scrapped 2008 bonuses for its executives due to the crisis, while Britain and France criticized bank bonuses earlier on Tuesday, calling big pay culture “perverse” and “unacceptable.” [ID:nLL342468]

The Dutch government announced extra taxes on big bonuses in March after public outcry over big payments, such as the 24.3 million euros in severance pay and sales of shares and options ABN AMRO’s former chief executive Rijkman Groenink got when his bank was bought up last year.

The Dutch guarantee scheme is similar to plans in other European Union states that also want to thaw credit markets, the Dutch Finance Ministry said. [ID:nLC667557]

The Dutch government will give guarantees for non-complex senior unsecured loans with maturities ranging from 3 months to 3 years, including certificates of deposits, ‘plain vanilla’ commercial paper and medium term notes, the ministry said.

The ministry said it expected the guarantee plan to run until the end of 2009. (Reporting by Gilbert Kreijger)

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