UPDATE: Germany Applauds Banks' Bonus Step, Plans New Rules

The German Finance Ministry Friday lauded German banks and insurers' commitment to self-regulation on bonuses payments, and said it will follow this up with additional rule changes.

"It is a positive signal that the largest German credit institutes and insurers have committed themselves in this declaration to apply the new standards for sustainable remuneration already," Wolfgang Schaeuble, the finance minister, said in a statement.

However, the ministry said self-regulation is only the first part of its planned three-step strategy on bonuses.

The strategy is being drawn up in line with the bonus payment agreement of the Group of 20 industrialized and developing nations, to defer bonuses over several years and implement clawback structures that allow bonus payments to be reduced if the long-term results of investment decisions turn sour.

The first step is the self-regulation of Germany's leading banks and insurers. In a second step, financial services regulator BaFin will send a letter to banks and insurers on supervisory rules by the end of 2009, at the request of the Finance Ministry. Thirdly, the Finance Ministry will in the coming spring draft an oversight law to change Germany's Banking Law and the Law on the Supervision of Insurance Companies.

The Finance Ministry couldn't be reached to give more details on the plans.

The self-regulation agreement, announced Thursday evening by Deutsche Bank AG (DB) Chief Executive Josef Ackerman, was supported by eight banks and three insurers, the finance ministry said.

The move came after the U.K. took a more radical step on bankers' remuneration Wednesday, announcing a 50% tax on bonuses paid by banks that exceed GBP25,000 annually. The tax will remain effective until April 5, 2010. The government hopes the measure will raise GBP500 million.

France is likely to introduce similar regulation in the future, a senior French government official told Dow Jones Thursday.

The German signatories to self-regulation were Deutsche Bank, Commerzbank AG (CBK.XE) Hypo Vereinsbank AG, DZ Bank AG, WestLB AG, Landesbank Baden-Wuerttemberg, BayernLB and HSH Nordbank AG as well as insurers Allianz SE (AZ), Talanx AG and Munich RE (MUV2.XE).

-By Andrea Thomas, Dow Jones Newswires; [phone]; [e-mail]