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Germany adopts 500B euro bank rescue package
(Agencies)
Updated: 2008-10-14 17:33 Greater Confidence Bundesbank President Axel Weber said the package provided a solid foundation for stabilising Germany's financial sector and would encourage banks to lend to each other again.
"The banks can now lend each other money again with greater confidence, because the state is securing the institutes and their business via capital measures and guarantees," the head of the German central bank said in a statement. The package will set up a "financial market stabilisation fund" to strengthen the capital base of institutions, which will be in place until the end of 2009. The fund could take on risky positions acquired by banks before October 13, 2008. The plan also gives the Finance Ministry power to influence decisions in a bank's strategy, including over the composition of its equity capital and its dividend policy. Steinbrueck said he wanted to cap the pay of executives at banks that used the rescue fund. "These managers should not receive more than 500,000 euros per year," he said. "And no bonuses. And no severance deals. And no dividends." German bank guarantees would run until December 31, 2009 under the plan -- in line with guidelines agreed on Sunday by European leaders, who pledged that any solvent institution would get public funding if needed. Merkel, who joined the other European leaders at the weekend meeting to show they were tackling the financial crisis together, said a new financial market framework was needed. "We must now together, as an international community, draw the right consequences. In my view, this includes strengthening the International Monetary Fund's role in the supervision of financial institutions," she said. |
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