ECONOMY

Gov’t to take shares in bank rescue plan

Banks will have to sell preferred shares to the state in order to be able to take part in the government’s 28-billion-euro rescue plan, the National Economy and Finance Ministry said yesterday. Although legislation submitted to Parliament a day earlier did not include such a term, the government effectively told banks not to come asking for money if they are not prepared to sell shares and give up some control to the state. «The state has made clear to all credit institutions that this is a condition for any participation in the plan,» the ministry said. Article 1 of the rescue plan law stipulates that when banks sell preferred shares to the state to get a capital boost, they must accept a state representative on their boards with veto powers over dividend policy and executive pay. The state representatives will get clear instructions that executives’ pay at banks that voluntarily take part in the plan do not exceed the central bank governor’s, according to the ministry. Greece’s central bank chief earns 362,000 euros a year. Greece has earmarked up to 5 billion euros to purchase preferred shares as part of its bank rescue plan. Under the plan, the government will also release up to 15 billion euros to back new bank loans or refinance existing ones and deposit 8 billion euros’ worth of bonds with the banks. The money must be used for financing small and medium-sized enterprises and to competitively price mortgages, the ministry added.