Chief executives could escape wage cuts at bailed-out banks
TENS of thousands of workers at bailed-out banks face cuts in pay, pensions and perks – but the highest paid could come through unscathed.
Staff at AIB, Bank of Ireland and Permanent TSB faces Croke Park II-style pay cuts after Finance Minister Michael Noonan told bank chiefs to cut wage bills by between 6pc and 10pc.
But a review of bankers' pay found that chief executives were paid less than their peers in other sectors.
Mr Noonan said he wants banks to cut their overall wage bills in order to help restore the lenders to profits and ultimately get them out of state hands.
But the move may also be motivated in part by a perceived need to spread cuts similar to those proposed under Croke Park II
Banks are formally outside the state sector but benefited from a €64bn bailout by taxpayers.
"It can never be forgotten by management and employees of these banks – both past and present – that without enormous cost to Irish taxpayers these institutions would not have survived and that this needs to be borne in mind during future discussions," Mr Noonan said.
Some of the savings will come from changes to pension benefits and the loss of perks, but sources close to the Government say they will want to see evidence of real reductions in take-home pay.
Unions reacted angrily to the news. "The Government's demand for further cuts is totally unacceptable," said Larry Broderick of the Irish Bank Officials' Association .
Mr Broderick rejected claims that bank staff pay increased after the bailouts and said the planned wage cuts weren't justified, adding officials will hold an emergency meeting later this week.
But that anger is only likely to grow, as bank staff learned that the best paid bankers could come through the process with their pay untouched.
The Mercer review found that the best paid Irish bankers were actually paid less than their peers – while lower paid bank staff compared favourably.
This makes those at the bottom of the banking pay scale more vulnerable to salary reductions.
The average salary at Bank of Ireland (BoI) and AIB is around €50,000 a year, but with pension contributions and other benefits each employee costs the banks around €60,000 on average.
Notably, Mr Noonan stopped short of recommending executive pay cuts.
Mr Noonan cannot order wage cuts but as the State owns two banks and is part-owner of a third, he is in a powerful position.
The Finance Minister said he is not looking for blanket pay cuts, but the savings must come from ongoing reductions, not expensive redundancy schemes, according to officials.
It all comes after the long-awaited Mercer review found that average bank pay increased after the bailout.
The report also suggested bonuses and other "incentive plans" could be brought back for staff working on tougher assignments or who have skills that are in demand.
Government officials said that would not happen before the banks return to profit, however.
But there is a chance some staff with sought after skills will be better paid as a result of the process, which is expected to take more than a year. Mr Noonan met with chief executives of AIB, Bank of Ireland and Permanent TSB in recent weeks, telling them to find the savings.
Huge holes in the defined benefit pension schemes at AIB and Bank of Ireland are also likely to be a major focus.
The Bank of Ireland scheme has a deficit of €1.2bn, AIB's was €1.4bn at the last count.
Under banking rules those holes are subtracted from the value of the state's holding in the banks – so plugging the holes will count towards the new saving targets.
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