FINANCE Minister Michael Noonan will refuse to endorse Bank of Ireland chief executive Richie Boucher's pay package at the bank's annual general meeting (AGM) next week.
The minister said he will not back the pay deal until the bank comes up with plans to meet the minister's demand to cut its overall wage bill.
In a letter to the Oireachtas Finance Committee, Mr Noonan said he did not believe it was appropriate to throw his weight behind the pay deals for Mr Boucher and other directors at the bank before Bank of Ireland outlines how it will secure savings in its wage bill.
Mr Boucher was paid more than €840,000 last year, including salary, benefits and pension contributions, despite the bank suffering losses of more than €2bn.
In March Mr Noonan ordered Bank of Ireland, AIB and Permanent TSB to cut their bills for pay and pensions by between 6pc and 10pc.
The minister said the cuts are a bid to help return them to profitability.
The level of cuts outlined also fits with the level of reductions for higher paid civil servants under the proposed Croke Park II deal.
Bank of Ireland is understood to have been asked to make the smallest savings of any of the three banks because it is the closest to making a profit and is not in majority state control.
The bank will hold its AGM on Wednesday.
"I wish to confirm that I have decided to abstain from voting on Resolution 2 – Consider the Report on Directors' Remuneration," Mr Noonan said in a letter dated April 19 and sent to the Oireachtas finance committee.
"I do not think it appropriate to endorse the Directors' Remuneration in advance of the Bank of Ireland's response outlining its strategy to deliver savings of 6pc to 10pc in total remuneration as requested in my letter of March 27.
"The bank's response is due by the end of April."
As a 15pc shareholder in the bank, the State has a vote on whether it believes the level of directors' pay is acceptable.
However, as a minority shareholder the minister would not be able to change the amount paid to Mr Boucher and the other directors – even if he actively opposed the deal rather than abstaining.
Richie Boucher's pay deal for 2012 amounted to €910,000 but the banker waived just under €70,000.
In its annual report, released last month, the part state-owned bank said Mr Boucher was paid a basic salary of €690,000, unchanged from 2011.
A report from consultants Mercer that said Mr Boucher and other bank chiefs are underpaid compared to top executives elsewhere.
The Mercer report calculated the BoI chief's pay package at €776,400 last year.