Lenihan is powerless to prevent AIB paying 3pc raise to staff
THE Department of Finance, which has extended billions in state aid to AIB, is powerless to prevent the bank from awarding its staff a 3pc pay rise.
It means Finance Minister Brian Lenihan, already furious at the bank's insistence on appointing an internal candidate to replace outgoing chief executive Eugene Sheehy, is once again left frustrated at the bank's actions.
AIB is now set to follow the example of Bank of Ireland and award its staff a 3pc pay rise, while other sections of industry and the public service suffer either freezes or pay cuts.
Bank of Ireland, along with the state-owned ESB, was last year one of the few major companies to award its staff the final 3pc due under the last national wage agreement.
After its refusal last year to pay the final instalment of the national wage agreement, AIB entered negotiations with its unions over a number of issues relating to pay, pensions and redundancy terms.
This culminated in staff refusing management's proposal of a 5pc across-the-board pay cut and ultimately, a referral to the Labour Relations Commission, which subsequently ruled that the bank should pay staff the 3pc increase.
This row follows on AIB's insistence that because of the €500,000 pay cap imposed by Mr Lenihan on the new bank chief's salary, it has been unable to attract a strong enough external candidate. Instead it wants to promote internal candidate Colm Doherty to the top job.
In a brief statement yesterday, the bank said that "following a recommendation to AIB bank on pay issued by the Labour Relations Commission in May, an average increment of 3pc has now been made to some categories of staff below manager level in the bank's operations in Ireland".
A spokesman for the Department of Finance pointed out that while AIB was in receipt of major public funding and while the finance minister had a "minority" shareholding in the banks, they were still private companies.
He said that while Mr Lenihan could lead by example and plead his case, he could not direct pay policy at private companies.
The Government has already invested €5bn in the AIB and Bank of Ireland, as well as giving them a two-year guarantee on all of their debts. It will also extend further public funds to the banks through the National Asset Management Agency (NAMA), which is due to pay out €54bn to absorb €77bn in property-related loans from the Irish banks.
But even after the NAMA funds flow into the banks' coffers, Mr Lenihan has stated the banks could be in need of further funding.
While AIB itself estimates it may need an additional €2bn, independent analysts put the figure as high as a further €3.4bn, with some of this likely to come from the State.