We had 'no choice' but to pay executive six-figure bonus -- BoI
Senior Bank of Ireland figures said yesterday the bank had "no choice" but to pay an outrageous six-figure bonus to one of its executives, despite the bank receiving billions in support from taxpayer.
Management at the bank strongly denied the figure was as high as the €500,000 quoted in yesterday's Irish Independent. Management also said that the bonus was paid several months ago, not in "recent days", as reported.
Payment of the bonus to an executive at the Bank of Ireland Asset Management (BIAM) has infuriated Finance Minister Brian Lenihan.
Mr Lenihan has demanded a speedy explanation as to why the money was paid out. However, the bank sources said the matter was "incredibly sensitive" and was a difficult situation to resolve.
"We have legal requirements which we must follow," one senior source said. "The bank is highly reliant on a number of key people within companies that we are trying to sell off, to boost our capitalisation levels.
"We have to walk a fine line. A large number of key people have walked off the job in the past five or six years from BIAM." The source added that the bank's lawyers had studied the situation very carefully and that it had no choice but to pay the bonus.
"Do we want to pay this bonus? No. Do we have to? Yes," one senior bank executive said.
The latest bonus outrage comes as the six banks bailed out by the taxpayer have paid bonuses totalling €45m since being guaranteed by the State, including €20m to staff at the failed Anglo Irish Bank.
Amid ongoing public outrage over the payment of bonuses to bankers, even after they begged for support in 2008, the revelation that a senior banker at BIAM was paid a massive secret bonus has drawn a furious reaction from Mr Lenihan, who knew nothing about it.
Mr Lenihan has demanded the bank explain the payment to him and bank sources have confirmed that it will supply the relevant information to the minister tomorrow.
"The payment was not notified to the minister, the NTMA or the department. We are awaiting an explanation from the Bank of Ireland," Mr Lenihan's spokesman said.
However, a senior finance source yesterday revealed the extent of Mr Lenihan's fury. "We're not happy, and if it was outside the terms of the agreement with the Government, then it is a breach of contract and it is very serious."
Under the terms of the Subscription Agreement that the bank signed on receiving taxpayers' money in March 2009, it had to disclose payments of bonuses connected to work done between 2006 and 2008 to the minister. The Department of Finance and the Attorney General's office is to examine whether this bonus payment falls under the terms of that agreement.
The money was paid in the form of a "guaranteed loyalty bonus", and it is understood that the payment relates to the sale of BIAM to US finance firm State Street for €57m, which is to be concluded early in the new year.
The Sunday Independent has also learned that a number of smaller bonuses were paid to other members of BIAM staff.
Despite Mr Lenihan's diktat to the banks that no bonuses are to be paid, AIB is facing more than 75 separate lawsuits as workers in the bank's Capital Markets division challenge government plans to block their bonus payouts.
Seventeen individuals, including senior figures in AIB's Capital Markets division, lodged proceedings in the High Court last week. The claims are all for amounts of more than €38,000 and some run to six-figure sums, reflecting the bonuses that the workers earned in 2008.
About 60 other employees and former employees have lodged similar proceedings in the Circuit Court, which handles smaller claims.
At the nationalised Anglo Irish Bank, €20,771,353 was paid to 1,594 employees after September 2008.
In 2009, €396,603 was distributed between 10 members of staff, with five sharing €273,787 this year. And 681 staff members at AIB were paid €1.3m after September 2008, with €19.3m paid to 1,387 in 2009 and no bonuses recorded in 2010.
Mr Lenihan said the former chief executive of Irish Nationwide received a bonus of €1m in November 2008.
"As set out in the INBS 2008 annual report and accounts, this comprised part of his overall remuneration of €2.313m in 2008," Mr Lenihan said.