State plans to control salaries at guaranteed banks

THE GOVERNMENT plans to place "proper controls" on salaries for employees working for the banks and building societies covered by the State's €440 billion guarantee.

Minister for Finance Brian Lenihan said he has set up a committee "to determine salaries for the banks that are now covered by the State guarantee scheme".

Mr Lenihan was responding to weekend newspaper reports that a number of middle-ranking executives in Anglo Irish Bank would receive bonuses for last year.

"As far as Anglo is concerned I understand that bonus was cleared before the State made an offer to buy the institution. I am extremely concerned that it happened," the Minister told RTÉ's Morning Ireland programme.

He said the "misbehaviour by management at Anglo Irish Bank meant that even with a State guarantee there was uncertainty about the viability of the bank". This had forced the State to become a 75 per cent shareholder in Anglo to safeguard the deposits, he said.

"It is essential that we make it clear to the world that those who invest in the Irish banks, who deposit in the Irish banks, can rest in security and safety that their deposits are safe."

Anglo said at its annual results at the start of last month that bonus payments were being cut to senior executives, though bonuses would still be paid for last year to lower-ranking staff at the bank.

The bank said that cuts in bonuses were being made on a sliding scale, from no bonus payments to Anglo's senior management falling in increments to 30 per cent cuts for other employees.

Meanwhile, the Financial Regulator has said it has no plans to lift the ban on short-selling in the shares of the four Irish banks, despite its UK counterpart, the Financial Services Authority, allowing its ban on short-selling in 34 financial stocks to expire on January 16th. A spokeswoman for the regulator said that the ban was "kept under constant review".

Short-selling in financial stocks, in which investors gain on the back of share prices falling, was banned in the UK and Ireland in September.