Pay slashed for bailed-out Spanish bankers

The Spanish government has placed limits on executive pay at banks that received state aid after a series of scandals over fat payouts for bankers who loaded dodgy property debt onto lenders that then needed bailing out.

The cap was set at 600,000 euros per year for executive salaries at banks rescued by public funds, and incentive pay was suspended, Economy Minister Luis de Guindos, a former Lehman Brothers executive, said on Friday.

Other kinds of compensation, such as extraordinary pension fund contributions, were also limited.

Top executives at Bankia, Spain's biggest bank by number of customers, earn more than 2 million euros a year even after the lender received 4.5 billion euros in state aid, local media reported.

On Thursday Spain said it would force banks to recognise 50 billion euros of losses on bad loans to property developers and on undeveloped lots and unsold housing blocks on their books.

Spain's banks have gone through a series of clean-ups but are still burdened by 176 billion euros in exposure to troubled real estate assets, equivalent to 18% of the country's economic output.

The fresh round of banking reform, labour market reform and strict austerity measures are all part of a drive by Prime Minister Mariano Rajoy to persuade investors that Spain has lifted itself clear of the euro zone crisis, which has driven up its borrowing costs.

For the four Spanish savings banks that the government has completely taken over and will soon auction off, executive pay will be capped at 300,000 euros per year, de Guindos said.

Non-executive pay was also cut, to 50,000 euros a year at banks that have been taken over and 100,000 euros in total retribution for employees at banks that have received some state funds.

Spaniards were shocked last year when it came out that executives at collapsed savings banks had awarded themselves multimillion-euro severance packages.