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MINISTER for Finance Michael Noonan has dismissed suggestions that the Government's pay cap for bankers will be scrapped for the new chief executive of AIB.

Mr Noonan said that the bank has indicated to the Government that it hopes to be able to appoint a candidate within the pay cap.

AIB executive chairman David Hodgkinson said last month that he hoped an appointment could be made within an earlier recommended pay level of €690,000.

But Mr Noonan said that it was a matter for Government to decide on the final figure.

"AIB and everyone else is aware that the pay in the banks is capped at €500,000," he said. "I do not see any reason from anything I have seen so far to move from the €500,000 cap."

The role is expected to be filled in the coming weeks.

However, Mr Noonan said that the bank needed to put forward a good defence for pushing the pay rate beyond the agreed cap.

"The position is they have indicated already that they might have a difficulty in recruiting at that level of pay, and both the Taoiseach and I have said, if they are making a case for a higher salary, it would want to be a good case indeed," he said.

It's understood that the bank's search for a new chief executive has narrowed to two candidates: David Duffy, a former senior executive at Dutch bank ING; and Brendan McDonagh, the former head of HSBC's North American business.

AIB is going through the biggest restructuring in its 45-year history.