German banks gear up to apply for aid from rescue plan

The German Government unveiled on Monday conditions for banks applying for financial support from its 480 billion-euro (645.46-billion dollar) bank rescue package as Berlin considers moves to help boost Europe's biggest economy in the face of an expected sharp global slowdown, reproted dpa.

One of the first German banks to go to Berlin cap in hand is likely to be Bavarian state bank BayernLB, which has been forced to make big writedowns resulting from the financial market turmoil that emerged 15 months ago as result of a meltdown in the risky US mortgage business.

Bavarian Finance Minister Erwin Huber, who heads up BayernLB's administrative board, Monday signalled on Monday that Bavaria accepted the conditions agreed by the Federal Cabinet in Berlin.

Coinciding with the Monday launch of the rescue plan, which is aimed at shoring up Germany's financial sector, the cabinet also agreed to impose a 500,000-euro limit on the executive pay scale of financial houses seeking support under the package.

But the restrictions on pay are to be only imposed in principle, the government said.

Bonus payments are to be made as a result of the state assistance and in general dividends are only to be paid to the authorities overseeing the government's rescue plan, officials said in Berlin.

The government is also planning to exercise influence over the business strategy of financial houses that have been hit by the crisis, which is likely to result in banks steering away from risky investments.

Other German banks are also believed to be considering whether to apply for assistance under the package, which followed the recent dramatic falls on world stock markets and concerns that the global economy to the brink of recession.

Martin Blessing, who heads up Commerzbank AG told the weekly Bild Zeitung Sunday that Germany's second biggest bank would examine the package.

However, Deutsche Bank AG chief Josef Ackermann ruled out Germany's biggest bank applying for assistance also telling the Bild Zeitung that the Frankfurt-based bank was "one of the strongest, best-capitalized banks in the world."

A German government spokesman said Monday that the coalition led by Chancellor Angela Merkel had also called on ministries to present specific proposals for helping to underpin economic growth in the country in the coming months.

In particular, this includes measures such as boosting energy saving programmes in buildings and sales of energy-friendly cars.

However, the chancellor had rejected moves for Berlin to consider drawing up a more general stimulus program linked to the financial crisis.

Under the rescue plan, Merkel's cabinet also decided to impose a 10-billion-euro limit on capital injections to help troubled banks limp through the crisis. Bank risk positions to be taken over are also to be restricted to 5 billion for each bank seeking assistance.

In attempt to demonstrate its crisis management credentials, the German Government pushed the rescue package through parliament in one day on Friday.

The package includes a raft of measures such as state guarantees to help ease the impact on banks of the global credit squeeze and moves to recapitalize financial houses.

As part of the German Government's effort to face up to the financial market crisis, Berlin also announced that the former European Central Bank chief Otmar Issing is to head up a special commission to consider reforms to the international financial system. dpa amc emc

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