BANK of Ireland is to pay more than €7m in bonuses this year to senior management and staff despite the taxpayer becoming the majority stake holder, the Sunday Independent can reveal.
In the wake of the public outcry over bonus payments to semi-state bosses and bosses at Anglo Irish Bank last week, pressure is mounting on Finance Minister Michael Noonan to protect the taxpayer from bonus excesses at the bank.
In total since 2009, Bank of Ireland's bonus bill to senior management and staff is to top €11.3m by the end of this year. The bank is also due to pay contractual bonuses of €600,000 to senior executives in 2011, and a further €200,000 in 2012.
Despite repeated demands by the current and the previous government for all bonuses to be waived, the Sunday Independent has confirmed that bonuses of at least €7m will be paid to staff within Bank of Ireland this year.
The figure due to be paid in bonuses this year was set to be in excess of €11m, but following the revelation that the bank misled former minister Brian Lenihan and the Department of Finance, that figure was reduced.
The revelation is likely to increase pressure on Mr Noonan who is attempting to assert his control over the banking sector.
Speaking to the Sunday Independent, Mr Noonan said he wanted to ensure that never again would the Government "fall down the trap" of not having the full story when it came to bankers' remuneration.
Earlier this year it emerged the bank repeatedly misled former Finance Minister Brian Lenihan by insisting that no performance-related bonuses had been paid to its senior management. The bank paid €2m to the State in recompense for misleading Mr Lenihan and the Oireachtas on bonuses.
Following a parliamentary question in November 2010, the bank insisted to Mr Lenihan that no performance-related bonuses had been paid in respect of the financial years ending in March 2009 and December 2009. This "incomplete and misleading" information was relied on by Mr Lenihan in his replies to Dail questions about bonuses.
In fact, more than €66m has been paid in bonuses to Bank of Ireland staff from September 2008 to December 2010, the report states.
The Department of Finance said all of these bonuses were performance-linked, but they were not classified as such by the bank. Following an investigation, it has emerged that senior executives in Bank of Ireland were paid previously contracted bonuses of €4.3m since the introduction of the bank guarantee in September 2008.
In a statement to the Sunday Independent, the bank said: "Since January 2009 Bank of Ireland has only made non-salary bonus type payments where it has a clear legal obligation to do so, where the bank believes there is a clear commercial case that is in the best interests of the business. The bank has also had and continues to have a number of staff who receive payment through commission on earnings in addition to their basic salary."
The bank will seek to raise €1.91bn from shareholders through an 18-for-five rights issue this month, as part of its drive to boost its capital base by €5.2bn to meet regulatory requirements.
With many shareholders unlikely to take up their options, the State is likely to become a majority shareholder in the bank.
At present, the State owns 36 per cent of Bank of Ireland. As part of the rights issue, this can increase to a maximum 70 per cent. The State is also providing €1bn in contingent capital.
In total, Bank of Ireland needs to raise €5.35bn. Of this, €4.2bn is required to bolster its core Tier 1 capital ratio, and €1bn is needed in contingent capital.