Transparency on status of bank bonuses and pay cap needed if AIB buys Goodbody

18 January 2021
  • Return to the speculative economy of the Celtic Tiger must be opposed.

Labour Finance spokesperson Ged Nash has called on the Minister and the Department for Finance to be transparent on what carve out, if any has been provided for banker bonuses and stockbroker pay if AIB proceeds to repurchase Goodbody stockbrokers.

Deputy Nash said:

“In 2010 after a state bailout, AIB was forced to sell Goodbody stockbrokers, and it was bought by FEXCO for €24 million. The majority state-owned bank, now led by the former chief economist at Goodbody is close to getting the gang back together. The cost of the deal has been speculated at multiples of what AIB received in 2010, costing the bank up to €130m.

“A report in the Sunday Times yesterday indicated that if the bank buys the stockbrokers that the ban on bank bonuses, and special tax rate of 89% wouldn’t apply.

“The Minister for Finance needs to be fully transparent here. Has he agreed to waive the rules put in place since the crash? If so, what are his reasons for that?

“We need assurances from the Minister that he isn’t removing the €500,000 cap on executive pay and bonuses through the back door.

“We can’t go back to the speculative culture that helped sow the seeds of the great economic crash.”

Recent Dáil questions by Ged Nash TD to the Minister for Finance

To ask the Minister for Finance his views on reports that a State-owned bank plans to buy-back a brokerage and wealth management firm (details supplied) at a premium price; if he has been formally informed of these talks by the bank; if so, the date on which he was informed; if he has the powers to prevent any proposed purchase under the Relationship Framework Agreement; and if he will make a statement on the matter. (Details Supplied) AIB is in exclusive talks to buy back Goodbody Stockbrokers. Ged Nash TD.

REPLY: As the Deputy is aware AIB is a bank which is listed on the Irish Stock Exchange and the London Stock Exchange and it would not be appropriate for me as Minister for Finance to comment on any media speculation.

To ask the Minister for Finance if a commitment will be given to retaining the effective ban on bank bonuses for the lifetime of the Government in view of the current Covid-19 crisis; and if he will make a statement on the matter. Ged Nash TD

REPLY: The Deputy will be aware that Government policy on banking remuneration has remained unchanged since the financial crisis. Extensive restrictions are in place and these are not simply confined to a small number of senior bankers whose pay is restricted by the €500,000 pay cap. These affect circa 23,000 workers across the three banks in which the State has a shareholding. The policy dictates that variable pay including bonuses and any other fringe benefits including the likes of health insurance and childcare cannot be paid to any staff members from the most junior lowest paid staff to the most senior ranks.

As a result the previous Government undertook to carry out a review of Government bank remuneration policy to determine if it remained fit for purpose. My department worked with the specialist advisory division of Korn Ferry to undertake this review. Stakeholders engaged with included the major institutional investors in the banks, proxy advisory firms, the Financial Services Union (FSU), the chairs of the remuneration committee in each of the banks, the Central Bank of Ireland and representatives of the Single Supervisory Mechanism (SSM) in Frankfurt.

As I have indicated previously I have read the report. It is a complex and far ranging piece of work and it has most certainly informed my thinking on the issue.

I acknowledge that there is a very different European regulatory environment in place now which will help prevent the return to some of the excesses of the boom years including the EU Capital Requirements Directive (CRD IV) and the Remuneration Guidelines of the European Banking Authority.

Furthermore the powers of the Central Bank were significantly enhanced by the Central Bank (Supervision and Enforcement) Act 2013, particularly powers to take action against wrongdoing by financial services providers and to strengthen the ability of the Central Bank to take action against individuals.

However I believe the issue of bank remuneration is inextricably linked to further restoring public confidence in the culture and accountability of our banks and the forthcoming SEAR regime and the Central Bank (Amendment) Bill more generally, will provide an effective framework and will help to reassure the public that meaningful cultural change is underway in the banking sector.

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