The German government plans to introduce a ‘cap’ on salaries for employees in banks that have received state aid, set at 500,000 euros, sources close to the government said on Monday.
Banks in which the state holds at least a 75 percent ownership stake, such as Hypo Real Estate (HRE), would not be allowed to pay employees and board members a salary exceeding 500,000 euros, nor additional bonuses. In banks like Commerzbank, where the state holds a smaller stake, the upper limit would also be 500,000 euros, but the salary could consist of a fixed and variable part, with the latter not being paid in the event of the bank’s bankruptcy. The new regulations limiting bonuses will not apply to claims dating back before the beginning of 2011.
At the government’s request, Commerzbank was limited in paying exorbitantly high bonuses in 2008 and 2009. The government in Berlin became a minority owner in that bank, stepping in with 18 billion euros after the collapse of investment bank Lehman Brothers. Since then, Commerzbank has been urging shareholders and the government to revise the compensation structure to remain competitive against rivals that continue to pay higher salaries to leading bankers. The bank declined to comment on the latest claims. Exceptions are possible if the bank pays the full interest on state aid or returns half of the money to the state, the same sources note. The new regulations are expected to be included in a new bank restructuring law and must receive the ruling coalition’s approval on Tuesday. Parliament is expected to decide on them on Thursday. (H)
