Department of Finance officials wavered last month over whether to recommend lifting a €500,000 cap at Bank of Ireland (BoI), just weeks before they finalised a key report that led to the scrapping of the restriction.
That is according to documents released to The Irish Times this week, under freedom of information laws, relating to the drafting of a report stemming from a year-long review of Irish retail banking by the department.
The pay cap was imposed on executives of bailed-out Irish banks at the time of the financial crisis. While each of BoI’s three chief executives since then has benefited from ministerial exemptions to be paid salaries well in excess of €500,000 — as it was alone among rescued banks in avoiding State control following the crash — the limit continued to apply to its other executives.
The review team, led by John Palmer, a principal officer at the department, was looking as of November 1st at retaining the executive pay cap for BoI, according to the documents, even though the Government had sold its final shares in the lender in September.
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By November 7th, a summary of recommendations proposed that the cap on maximum BoI pay to be lifted. However, this was not contained in a draft of the near-complete report circulated by officials three days later.
This prompted an intervention by Des Carville, head of division in charge of taxpayers’ stakes in the banks, who argued in an email to colleagues on November 10th that the BoI cap should be removed.
Salary restrictions
“It goes without saying that I think the 500k cap should be removed for BoI as we are no longer a shareholder in that bank,” Mr Carville wrote at the time. The report was subsequently tweaked to include a recommendation that salary restrictions be abolished at BoI.
While some draft versions of the report also urged that €500,000 pay caps be lifted at AIB and Permanent TSB (PTSB) once the State’s stake in each dropped below 50 per cent, the final 200-plus-page document, published on November 29th, merely said that it should be removed when the shareholdings fall to an unspecified “appropriate level”. The State continues to own 57 per cent of AIB and 62.4 per cent of PTSB.
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Then minister for finance Paschal Donohoe’s move last month to adopt the pay-cap recommendations, as well as a call to allow for a return of bonuses of up to €20,000 and certain benefits across the three banks, were met with criticism by members of the Opposition in the Dáil and the Oireachtas finance committee.
Wealthy bankers
Sinn Féin leader Mary Lou McDonald said at the time that “there’s something really twisted about allowing big pay hikes for wealthy bankers while workers and families endure an unprecedented cost-of-living crisis”.
Mr Donohoe ordered his officials in November 2021 to carry out a wide-ranging, year-long review of the state of Irish banking. This followed decisions by the overseas parents of Ulster Bank and KBC Bank Ireland to exit the Republic as the industry grappled with high regulatory capital demands, low demand for credit, and an influx of fintech and non-banks vying for parts of their business.
Early drafts of recommendations being pushed by the review team in the latter stages of the process included one calling for a banking levy, in place since 2014, to be phased out over five years to 2028. The charge, which raises €87 million a year from AIB, BoI and PTSB, was extended by a further year to the end of 2023 in the latest budget. The final report, however, made no recommendation on the future of the levy.
