AIB 'bonus' staff owe loans to bank on property, shares
Some workers are highly leveraged and wanted the payments to clear their borrowings, says source
Published 15/12/2010 | 05:00
Some AIB staff who were due to share €40m in bonuses have loans with the bank used to buy shares and investment properties, the Irish Independent understands.
The loans were taken out for a range of investments, including AIB shares, apartments and other equity investments. Some staff would have been able to use the bonus money to pay down debt.
AIB has declined to comment to the Irish Independent on the number of loans held by staff or any potential arrears, simply saying staff are treated the same as customers and their affairs are strictly confidential.
This week, staff at AIB lost out as the Government halted a payment of €40m to them, saying that the bank would not get any more state support if it went ahead with the payments.
Staff at the bank can earn large salaries once they hit their personal targets, regardless of the bank's overall profitability in a particular year. However, bonuses had become part of salary in all but name for many staff at the bank.
Sources within AIB say that a large number of staff are under pressure to repay loans and other debts.
The bank, which has a special division to deal with staff transactions, is managing staff mortgages as well as other loans many took out to purchase AIB shares as part of its share option scheme.
Every year, thousands of AIB staff routinely purchased shares that were allotted as part of the profit sharing scheme, often borrowing money from the bank to buy them.
They were incentivised to regularly raise their investment in the bank through tax incentives that encouraged them to take shares in lieu of cash bonuses.
Bank staff could borrow funds from the bank up to a maximum level of €12,500 to purchase additional shares under this scheme, which if held for three years were not liable for income tax, according to the bank.
In a limited number of cases, AIB accepted its shares as security on staff loans taken out for a wide range of purposes. But as the shares are now worthless, it will be trying to go after other assets held by staff members that could be used to raise money to clear its debts.
Some staff within the bank have complained that the bank has in some cases treated AIB employees who have financial problems more harshly than some of its indebted customers.
A number of the higher paid executives are also said to have invested in property with large loans from AIB which must be repaid.
There are reports that some of the more senior executives used their annual bonus to finance big property loans.
"Some of the senior guys were very highly leveraged and depended on their bonuses to clear the loans," according to one bank source. They would run into problems to repay those loans if they lost that source of income.