About 31,100 staff at Bank of Ireland, AIB and Permanent TSB are facing cuts in their pay and pensions after Minister for Finance Michael Noonan yesterday directed the banks to reduce their remuneration costs by 6-10 per cent.
This move is designed to help the banks return to profitability, which in turn would position them for a sale to private owners for the benefit of the exchequer.
It follows the publication yesterday of a report on bankers’ pay by consultants Mercer, which showed that average salaries for “continuing employees” – staff employed by the banks who were in situ at the time of the crash in 2008 – has increased by 4-16 per cent in the past five years.
Mr Noonan said that with the banks still incurring losses it was an “inescapable conclusion that the cost base of the institutions needs to be reduced further”.
He said this was “essential” if the banks were to “return to profitability, be in a position to support the economy and repay the State’s investment through a return to private ownership”.
The cuts are expected to take effect in 2014 and will be achieved by reductions in pay and pension benefits, and efficiency gains from new working practices and structures.
'Totally unacceptable'
The Irish Bank Officials' Association said the proposed cuts were "totally unacceptable" given that staff had taken cuts in their total remuneration of up to 11 per cent.
Each bank has been asked to draw up its own cost-saving plan and the Department of Finance expects these to be delivered within weeks.
The percentage range in cuts reflects the different business models of the banks and the fact that some are more advanced in their cost reduction programmes.
The Minister warned that if the cost reductions were “not forthcoming”, the Government would “consider other options that will achieve its aims”. The department declined yesterday to state what these options might involve.
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While AIB and Permanent TSB, which are both more than 99 per cent State-owned, can be expected to fall into line with the direction, Bank of Ireland's attitude is less clear.
Bank of Ireland is 15 per cent owned by the State and has repaid ¤3.8 billion of the ¤4.8 billion in support it has received from the exchequer since 2008.
Its chief executive Richie Boucher also earns ¤623,000 a year, which is outside the ¤500,000 Government-imposed pay cap for CEOs.
Bank of Ireland said it noted the findings of the report and reiterated its “strategic objective” to reduce its cost base, including payroll.
“Employee costs have been reduced by 23 per cent over the past four years and these will continue to reduce,” the bank said. It declined to comment on whether Mr Boucher would take a pay cut.
The 125-page Mercer report found that “continuing” staff at IBRC received average increases in their salary of 16 per cent between 2008 and 2012 to ¤71,300. Their total remuneration, which includes pension entitlements and other benefits, rose by 1 per cent to ¤92,000.
This reflected premiums paid to staff to retain their services given that it was effectively in wind-down. IBRC was placed into liquidation on February 7th with staff now only entitled to statutory redundancy payments.
The average salary rises at the other banks ranged from 4-6 per cent and the Mercer report found that total remuneration declined at AIB, Bank of Ireland and PTSB over the four-year period, largely due to no bonuses being paid.
