BERLIN, GERMANY - THE German government has set strict conditions for banks planning to tap into its 500 billion euro (S$990 billion) rescue package, including limits on manager salaries, according to a draft of the law seen by Reuters.

The measures under discussion before the draft law goes to cabinet on Monday morning include obliging banks to set appropriate compensation packages for top managers.

The draft law states that salaries above 500,000 euros per year are considered inappropriate, although a government official said there was still disagreement about this condition and it could be changed.

Banks participating in the scheme would also be forced to scrap inappropriate severance and bonus schemes and would not be able to pay out dividends while they were making use of the rescue funds.

The draft foresees a recapitalisation cap of 10 billion euros per bank and also sets a limit on the assumption of bank risks at 5 billion euros per bank.