Germany's HRE bank defends millions in bonus payments
Germany's troubled Hypo Real Estate bank, which last year narrowly avoided bankruptcy before being nationalised, defended Sunday its handing out of millions in extra payments to staff.
The property and municipal funding specialist acknowledged it had distributed additional payments to staff totalling 25 million euros (33 million dollars) in 2009, following media reports on the issue.
"Some 1,400 staff -- but not the executive board -- received a one-off payment based on the contribution of the employee to restructuring, stabilising and re-orientating the corporation," HRE said.
As with all banks in Germany that have benefited from state aid, directors' salaries at HRE were set at a maximum of 500,000 euros per year.
HRE said this limit was respected and that the payments were linked to an agreement by staff not to press for additional bonuses after they threatened legal action.
But the payments came in for sharp criticism across the political spectrum.
"The insensitivity of the HRE board is tough to beat," said the parliamentary group leader of the opposition Social Democrats, Joachim Poss, echoing remarks from conservative and left-wing parties.
"The payments are in effect bonuses which taxpayers are unable to understand."
During the 2008 financial crisis HRE collapsed, partly due to major business errors made by its German-Irish subsidiary Depfa, and has only been saved by 100-percent nationalisation and an infusion of 142 billion euros in state guarantees.
HRE was the only German bank to fail Europe-wide stress tests in July, and it has become heavily dependent on state guarantees to be able to refinance its debt on the financial markets at affordable interest rates.
In July it began creating a "bad bank" to which it plans to transfer 210 billion euros in risk positions and non-strategic assets.
© 2010 AFP