Frankfurt, Germany - The German Cabinet on Monday approved terms that banks will have to accept in order to benefit from its €500bn bailout plan - including a strict salary cap of €500 000 ($675 000) for top bank managers.
Those managers would also be obliged to forgo bonuses and dividend payments as long as their banks were indebted to the government.
Banks would also be charged a "fee in line with market levels" in exchange for the loan guarantees.
The federal bailout plan approved by parliament Friday includes up to €400bn in lending guarantees for banks, plus as much as €80bn to recapitalise banks and, if necessary, buy up risky assets. An additional €20bn is intended to back up the guarantees.
Leaders of some Germany's largest commercial banks said this weekend that they would not immediately seek money on those terms.
Josef Ackermann, the chief executive of Germany's biggest private bank, Deutsche Bank AG, has said his company does not need capital from the state.
Martin Blessing, the CEO of Germany's No. 2 bank, Commerzbank AG, was quoted as saying by the Bild on Saturday newspaper that his company would look at the package and see "whether it comes into question for us."
Yet the salary cap approved on Monday looks to be a major sticking point for some banks.
According to Deutsche Bank's 2007 annual report, Ackermann's total compensation including salary, benefits and shares amounted to almost €14m last year.
Commerzbank's annual report said its outgoing CEO Klaus-Peter Mueller received total compensation of €3.2m in 2007, not including shares and some other benefits. Blessing, the company's new chief executive since May, received compensation of €2m in 2007, not including shares and some other benefits.
'Fast stabilisation'
Among Germany's other private banks, Postbank AG and HypoVereinsbank AG declined to discuss their plans and Dresdner Bank AG could not be reached for comment.
Meanwhile, Germany's seven state-owned Landesbanks are currently reviewing whether to take up the government's bailout package offer.
A spokesperson for HSH Nordbank said the bank was still looking at the package, while WestLB, NordLB and Landesbank Hessen-Thueringen (Helaba) declined to comment.
A spokesperson for Landesbank Baden-Wuerttemberg, Germany's largest state bank, told The Associated Press it was not interested in any bailout compensation.
"LBBW stands in the point of liquidity and capital, and in comparison to the sector, is in good shape," chief executive Siegfried Jaschinski said last week.
State bank BayernLB, however, said it wants to accept money from the package as soon as possible.
"It's about achieving a fast stabilisation," said Erwin Huber, BayernLB's administrative board chief and the finance minister of the southern state of Bavaria, speaking on the ZDF-Morgenmagazin television program Monday.
Huber didn't say how much the bank would seek to borrow, but said in order to meet the government's conditions, the bank would have to be restructured, partially privatised or merged with another bank.
Last week, state banking officials confirmed that Bayern LB was discussing a possible merger with Landesbank Baden-Wuerttemberg.
In the interview Monday, Huber was in favour of the conditions that government has imposed on banks.
"Performance has to be linked with responsibility," he said.
In no rush
BayernLB and other public-sector wholesale banks - which are owned by a combination of state governments and municipally backed local banks - have faced hefty write-downs as a result of the subprime lending and credit crisis.
German insurance companies were not rushing to take part in the bailout.
German reinsurer Munchener Rueck AG told the AP it won't use the government's bailout package, saying it did not have problems on its balance sheets as a result of subprime mortgage products.
A spokesperson for Germany's third largest insurance company, Talanx AG, said it and subsidiary Hannover Re also don't need bailout help.
"We're well capitalised; the bank crisis is a liquidity crisis and that doesn't affect us," Talanx spokesperson Thomas von Mallinckrodt told the AP.
Insurer Allianz AG said it would look at the bailout plans from Germany, other European countries and other countries worldwide before it makes any decision on the matter, a spokesperson said Monday.
The spokesperson, speaking for the entire group, noted the company has no immediate needs and is well capitalised.
Allianz still includes Dresdner Bank, though Allianz said in late August it would sell the division to Commerzbank in a €9.8bn. The entire deal is expected to close by the end of 2009.
Other German financial institutions declined to comment on the bailout package, including the cooperative Central Bank of the Volksbanks, Raiffeisenbanks in Rhineland Pfalz and Westphalen, as well as IKB Deutsche Industriebank AG.
Also Monday, Otmar Issing, a former chief economist for the European Central Bank, was chosen to serve as chief adviser to the government as it lobbies for reforms on international financial markets.
- AP