BERLIN - GERMAN Chancellor Angela Merkel wants to make her government's banking rescue plan more attractive to lenders that have spurned the initiative, a press report said on Tuesday.

Ms Merkel and her conservative Christian Democratic Union (CDU) are mulling a decrease in interest rates paid by banks that ask for guarantees on interbank loans, from the current level of 2.0 per cent, the Financial Times Deutschland said.

The party is also considering an extension of the duration of the guarantees to five years from three at present, it added.

But the moves might be opposed by Merkel's coalition partners in the Social Democratic Party (SPD) and by the European Commission, the report said.

Berlin threw together a rescue package that was approved on Oct 17 and provided banks with up to 400 billion euros (S$773.5 billion) in loan guarantees and up to 80 billion in direct capital injections.

Few banks have applied for the aid however, which has a number of conditions attached, in particular a cap on the salaries of directors of banks concerned.

The banks would also not be able to pay dividends. --AFP