Cost of banking debacle
Q Can anything be done about the big pensions of former bankers and the big pay packages of current bankers?
Not a lot it would seem, beyond exerting moral pressure publicly and privately on bankers and ex-bankers to take pay and pension cuts over the €64 billion banking cost to the State.
The focus has mainly been on large pensions paid to former senior executives of AIB, which has been bailed out by the Government with €20 billion of taxpayers’ cash.
Eugene Sheehy, AIB’s chief executive when the crisis struck, bowed to pressure from the bank and the Government on Tuesday and took a 20 per cent cut in his pension to €250,000 a year.
Pressure has grown on others to follow suit, including former Bank of Ireland chief executive Brian Goggin who has a €660,000 a year pension, and ex-AIB managing director Colm Doherty, whose pension is believed to be about €120,000 a year, lower than a €300,000 sum reported last week.
Given that pension funds are run separately from State-owned banks and control rests in the hands of trustees who run them, neither the Government nor banks have any legal power to impose cuts on pensions.
Struggling pension schemes can apply under section 50 of the Pensions Act to reduce benefits to their members but pensioners already in receipt of payments are not affected.
So, other than asking former senior executives to forgo part of their pensions voluntarily (as AIB has done) or calling on them publicly to do so (as the Coalition has), not much can be done.
As for six bankers at the former Anglo Irish Bank on pay of more than €500,000 a year, the nationalised bank refused a request for pay cuts from Minister for Finance Michael Noonan in April.
The bank, now Irish Bank Resolution Corporation, has defended the remuneration saying it has to pay market rates to retain staff required to ensure the bank recovers as much as it can of the loans at the lowest cost to the State.
For a State-owned bank winding down the country’s two most toxic lenders (Anglo and Irish Nationwide) which are already costing the public €34.7 billion, this is hard to stomach, particularly with a harsh budget just weeks away.
The Department of Finance has hired consultants Mercer to review pay in Irish banking but this is more a benchmarking exercise than an effort to force pay reductions.
Public baiting therefore may be the only way to reduce pay and pensions at taxpayer-supported banks.