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Greece tightens rules on bank aid plan

Greece tightens rules on bank aid plan

Greece's conservative government said Thursday it will scrap bonuses and cap salaries of top managers whose banks join the country's 28 billion euro ($36 billion) bailout plan.
The plan was set up to guarantee banks' debt and infuse them with capital to protect them from the global financial crisis. But the help comes with string attached.
"All bonuses are abolished for the duration of the program," Economy Minister George Alogoskoufis said Thursday.
Top managers' wages will not exceed the salary of the Governor of the Bank of Greece, the country's central bank, Alogoskoufis said. Officials at the Bank of Greece refused to say how much their governor earns.
State-supported banks will also not be allowed to distribute more than 35 percent of their profit to shareholders.
Thursday's measures were added to a voluntary bank aid law which has been submitted to parliament. The law allows the government to boost lenders' liquidity by as much as 28 billion euros in loan guarantees, bonds and equity injections.
To qualify for the plan, Greek lenders must sell the government preferred stock for up to 5 billion euros ($6.5 billion), Alogoskoufis said.
A state representative will be appointed to the boards of assisted lenders to make sure the extra liquidity will be channeled to Greek businesses.
Greek banks have so far not reported any significant losses from toxic investments associated with the U.S. subprime mortgage crisis. But their exposure to East European countries such as Romania, Bulgaria and Serbia, which might be affected by the crisis, has raised concerns.
Hurt by falling bank shares, the Athens Stock Exchange has lost about two thirds of its value since the beginning of the year.