Germany to set strict conditions for bank rescues

By Noah Barkin and Erik Kirschbaum

BERLIN (Reuters) - Germany has set strict conditions for banks that make use of its 500 billion euro (387.7 billion pound) rescue package, including limits on managers' salaries, bonuses and severance, according to a draft law seen by Reuters.

Berlin unveiled the broad outlines of the package last Monday 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 the conditions that banks taking part in the scheme will be subject to was still being discussed early on Monday. Chancellor Angela Merkel's cabinet is expected to approve the full law later on Monday.

According to the draft, banks that make use of government funds would be forced to set "appropriate" compensation for their managers.

The draft law states that salaries above 500,000 euros per year are considered inappropriate, though a government official familiar with the talks said there was disagreement about this figure and it could still be changed before the cabinet meeting.

"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 draft states.

Banks participating in the scheme would 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.

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