Bankers ordered to cap salary at €500,000
Lenihan call sparks fear of mass exodus
THE Government last night drew a line under top bankers' massive salaries by demanding that no executive should earn more than €500,000.
In an unprecedented move, Finance Minister Brian Lenihan has written to all of the banks covered by the State guarantee seeking the cap on the pay packets of their executives' wages.
Senior financial sources last night predicted the move would lead to a "mass exodus" of senior banking management over the coming months.
The country's main banks would not comment directly on the proposed salary cap last night. Allied Irish Bank and Bank of Ireland -- who will receive billions of euro from the State under the recapitalisation scheme -- confirmed they received the minister's letter. They would only say they were considering its contents.
Privately, however, the banks admit they have no choice but to comply with the Government's request.
Mr Lenihan has also demanded the complete scrapping of bonuses at the seven financial institutions covered by the Government guarantee scheme.
In some cases the new controls will mean executive salaries falling to one-sixth of their 2007 levels, when some chief executives were paid more than €3m.
"We are fighting for our financial and economic survival," Mr Lenihan said.
"Those who earn most must be seen to pay most and to give up most."
Taoiseach Brian Cowen said it was a Government decision to have the top remuneration capped at half-a-million euro.
"That is still a substantial salary as we all know," he said.
"It's important we would have people competent to deal with the very serious challenges that face our banking sector. The recovery of the banks is critical and fundamental to our own national economic recovery as well."
The proposed salary cap follows the delivery of a report by the Covered Institutions Remuneration Oversight Committee (CIROC) -- which stopped short of stripping pay down to €300,000, as demanded in some quarters.
The CIROC recommended the following salary rates for chief executives: AIB €690,000 (down from €696,300); Bank of Ireland €690,000 (down from €1,185,000); Irish Life & Permanent €545,000 (down from €890,000); Anglo Irish Bank €545,000 (position currently vacant); EBS €360,000 (down from €441,000); Irish Nationwide €360,000 (down from €1,000,000); and Postbank €230,000 (€260,000).
However, the Government has set a limit of €500,000 or the amount recommended by CIROC, whichever is lower.
Despite this, Fine Gael described the new ceiling as "a cop-out". Finance spokesman Richard Bruton said the country's top bankers should only receive half the amount proposed by the Government.
"I am astonished that Brian Lenihan has decided to allow executives in AIB and Bank of Ireland to continue to draw salaries of €500,000," Mr Bruton said.
Labour said many members of the public would still regard the pay scale as excessive, "particularly having regard to the role played by many senior bankers in creating our current economic crisis".
Guarded
Only AIB and Bank of Ireland would give a guarded reaction to the salary cap proposal last night.
An Allied Irish Bank spokesman said: "We've received a letter from the minister, who has asked our board to consider issues at a board meeting as soon as possible, which we will do."
Bank of Ireland echoed this: "We've received the report and letter from the minister. The remuneration committee of the board will be convening and reverting back to the minister."
The Government has threatened to take action under the guarantee scheme if any institutions should "go rogue" on the issue.
However, one senior banker warned the fact that the report calls for "adequate headroom" between the salaries of chief executives and subordinates "will likely lead to a mass exodus of senior management over the coming months".
- Senan Molony and Joe Brennan
