BERLIN (Bloomberg) - Germany's Finance Ministry published a draft law that allows banks to swap toxic assets for guaranteed bonds under a voluntary programme to be considered today by Chancellor Angela Merkel's Cabinet.

Financial institutions would deposit assets in so-called bad banks at 90 percent of their book value and then sell bonds at that value, paying an annual fee for the guarantee, said the draft that was released yesterday in Berlin. The lenders will pay the government rescue fund the difference each year between the assets' discounted book value and "fundamental" values as determined by auditors. The draft was not more specific.

"While this clearly is a compromise that is going to be expensive for banks, it's important that we get on with enabling banks to increase lending," Manfred Jakob, a Frankfurt-based analyst at SEB AG, said yesterday in a phone interview. "Still, the plans are not very detailed yet."

Banking lobbies and business owners have complained that Finance Minister Peer Steinbrueck stalled over the bad bank model, failing to unfreeze credit as he sought ways to limit the burden to taxpayers before national elections in September.

The draft "sounds the right political chords by placing the onus of cleaning banks' books on shareholders rather than taxpayers", Albert Rupprecht, a Christian Social Union lawmaker and chairman of the parliamentary committee that controls the Soffin bank-rescue fund, said in an interview. "It won't be so attractive to banks for that very reason."

The Berlin-based BDB private banks federation declined to comment on the draft.

"We need to study the detail," spokeswoman Michelle Schmitz, said in a telephone interview. The BDB, representing lenders including Commerzbank AG and Deutsche Bank AG, has sought support for a rescue plan that places a larger burden on taxpayers than envisaged by Mr. Steinbrueck's bill.

"Everything we're proposing aims not to burden the taxpayer," Mr. Steinbrueck told reporters in Berlin on Monday. "Burdens would accrue to shareholders and not to the taxpayer" at the end of maturity.

Mr. Steinbrueck's Social Democrats and Ms Merkel's Christian Democrats, coalition partners since 2005, are rivals at the September 27 election.