Madrid, Feb 3 (EFE).- Spain's government has approved a financial-sector overhaul that, among other measures, limits the amount of executive pay at banks that are seized by the government or forced to accept bailout funds.
The chief executives at nationalized banks will have their pay capped at 300,000 euros ($395,000) a year, while top executives of lenders that have received money from the Fund for Orderly Bank Restructuring will receive no more than 600,000 euros ($790,000).
Those figures, which Economy Minister Luis de Guindos revealed at a press conference, are part of a financial overhaul approved Friday by Prime Minister Mariano Rajoy's administration.
That program to shore up Spain's financial sector also gives the weakest banks four months to present merger plans and a year for the entire sector to boost loss provisions by 50 billion euros ($65.5 billion).
De Guindos said the government is not looking to set salaries in the private sector, but rather to ensure the aims of government intervention and bailout packages are achieved.
High salaries for bankers and the fat severance packages received by some who lost their positions have sparked controversy in Spain, which is beset by a serious crisis with a record 5.2 million people - nearly 23 percent of the labor force - out of work.
Top bankers whose salaries will be slashed include the executive chairman of BFA-Bankia, Rodrigo Rato, a former Spanish economy minister and IMF chief who earned 2.34 million euros ($3.06 million) last year.
BFA-Bankia received 4.46 billion euros ($5.84 billion) in loans from the FROB, a public entity that has provided aid to numerous savings banks in Spain.
The new financial regulations unveiled Thursday are intended to encourage banks to unload foreclosed property assets at fire sale prices and force entities that cannot meet the stricter loss-provision requirements into mergers.
"The goal is to improve the confidence in and the credibility of the Spanish banking sector through the cleaning up of real-estate assets, consolidation of non-viable entities and ... better corporate governance," De Guindos said Thursday.
Banks that opt to merge must present their plans before a May 31 deadline and will be eligible for financial assistance.
To receive government approval, the merged entity must be 20 percent larger and pledge to increase lending. It also must adhere to corporate governance rules related to, among other things, executive pay.
Banks that opt to merge also will be eligible to receive financing from the FROB, whose capital will be boosted from 9 billion to 15 billion euros.
The overhaul of the financial sector has been one of the main priorities of the Rajoy administration since it came to power in December, along with reining in a high budget deficit and lowering sky-high unemployment.
The effects of the global recession were aggravated in Spain by the collapse of a long construction and property boom that had made the country's economy the envy of most of Madrid's European partners.
