Business Irish

Sunday 22 April 2018

AIB warns that €500,000 cap on bankers' pay threatens trade

Donal O'Donovan

Donal O'Donovan

AIB is warning potential bond investors that a €500,000 cap on bankers' pay could be a potential risk to the business.

It comes as the bank moved a step closer to issuing mortgage-backed bonds by gaining Central Bank approval of its updated "covered bond programme", according to a document filed with the Companies Office.

The filing shows that AIB's newly updated programme was approved by the Central Bank on Monday.

A prospectus for potential bond issuance was subsequently filed with the Companies office on Tuesday.

It includes the warning in relation to the pay cap.

"The group cannot guarantee that it will be able to attract, retain and remunerate highly skilled and qualified personnel competitively with its peers," it notes in a newly updated prospectus aimed at potential investors in the bank's covered bond programme.

"If the group fails to attract and appropriately develop, motivate and retain highly skilled and qualified personnel, its business and results of operations may be adversely affected," the document states.

On Monday the Irish Independent reported that the bank was poised to follow Bank of Ireland by returning to the bond markets.


The bond prospectus details the bank's history since the bailout, legal status and risks regarded as potentially of interest to investors, including the possibility of an Ulster bank-style IT disaster that would prevent customers accessing their accounts.

The document is the latest sign that AIB is primed to issue new IOUs that are secured on pools of Irish residential mortgages. Bank of Ireland raised €1bn of non-government guaranteed debt secured on Irish mortgages last week.

AIB's covered bond programme is updated annually but the timing of the latest update – just as the bond markets have swung dramatically open – has prompted speculation a deal could be imminent, as long as the bank has a pool of appropriate mortgage assets ready to populate a new deal.

If AIB does opt for a bond deal, the money is likely to go on reducing its reliance on the European Central Bank (ECB) for ongoing liquidity.

That means the domestic mortgage market is unlikely to see much impact from any fresh cash raised, at least in the short term.

Like other Irish banks AIB is able to borrow from the ECB at an interest rate of just 1pc, compared with the more than 3pc it will be charged in the markets.

Irish Independent

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