DEAL DETAIL:BANKERS WILL not be able to secure large pay deals to reward them for excessive risk-taking, but the Government is not to set caps on executives' pay, it emerged last night.
In the Dáil late last night, the Minister for Finance, Brian Lenihan said the taxpayer is "entitled to insist" that reckless conduct is not rewarded.
The Minister said he had noted the "great concern" about top bank executives' multi-million pay deals inside and outside the Oireachtas.
Warning against a repeat of short-term business practices and excessive risk taking, the Minister said: "We will have to ensure that those practices are stamped out".
The Minister's language was carefully chosen and does not require him to set limits on pay packages - a move that would undoubtedly be opposed by the banks.
"Let there be no illusions that as a result of this legislation we are going very deep into the banking system. We have to ensure that the taxpayer is protected," he said.
The scheme is still being worked on by the Department of Finance, the Central Bank and Financial Regulator and the National Treasury Management Agency (NTMA).
The final details will not be ready until early next week when they will be laid before the Houses of the Oireachtas by the Minister.
Banks seeking to use the scheme will have to appoint new board directors to ensure that the public's interest is protected in their future operations.
The qualifying institutions will pay "a substantial" fee for having their operations underwritten by the State, but not one that will be "penal or punitive".
He said he would have "no tolerance for any institution that seeks to exploit" the scheme for "commercial advantage", he told Labour TD, Joan Burton.
The NTMA estimates that the six Irish banks owe €440 billion, but have €520 billion in assets, and are not insolvent. The Minister said he is awaiting a full report from the Central Bank before deciding on the charges that will be imposed on banks using the scheme.
"I have it clear throughout that the central issue was liquidity in the banks and not the questions of insolvency," Mr Lenihan told the Dáil shortly before 10pm.
The six Irish banks, including AIB and Bank of Ireland, are in a different situation to other foreign-owned banks operating here because they have "no other sovereign power to turn to".
They would, he said, "be orphans of the storm in international terms" because banks such as Ulster are owned by other banks regulated by other states.
He said he appreciated the points that have been raised by Ulster and others that they are being discriminated against by the Government's move.
It would be "a very far-reaching step" for the Government to offer the scheme to banks that are not regulated by the Central Bank and the Financial Regulator.
However, he is prepared to consider applications "sympathetically" from such banks, as long as they have a significant branch network here - a development that would include Ulster and National Bank, perhaps, but not Rabobank.
However, he emphasised that the Government is only still looking at the rules that would be used if the foreign-owned Irish branches are to be included.
The model used by the Swedish Government in the early 1990s to stabilise its banking system had influenced the Government's plans.
