Bank of Ireland warns of staffing ‘risk’ if bonus ban above €20,000 remains in place

The chairman of Bank of Ireland’s remuneration committee has warned that an ongoing ban on bonuses across domestic banks above €20,000 “causes significant risk” for the recruiting and retention of staff.

The group is currently seeking to hire chief executives for both its Retail Ireland and UK divisions.

Writing in its annual report, the remuneration committee chairman, non-executive director Steve Pateman said the company welcomed the Government’s moves late last year to allow banks recommence bonuses of up to €20,000 and scrap of a de facto €500,000 executive pay cap at Bank of Ireland. Both restrictions were legacies of crisis-era bailouts.

“This was a welcome and significant step on the road to remuneration normalisation,” Mr Pateman said.

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However, he added: “This new cap on variable pay of €20,000 significantly constrains the group’s ability to structure and position senior role holders’ compensation packages competitively against the market. This causes significant risk to the group for the recruitment and retention of high-calibre employees with appropriate skills and affects our ability to tie behaviours to an individual’s compensation outcomes.”

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Bank of Ireland, led since November by chief executive Myles O’Grady, is currently looking to hire a new chief executive of its Retail Ireland unit. Previous incumbent Gavin Kelly was asked to act as interim group chief executive for a period last year before being named head of the corporate and markets division last week. Senior company executive Susan Russell has been the acting head of Retail Ireland since last September.

The chief executive of Bank of Ireland’s UK unit, Ian McLaughlin, handed in his notice in January after accepting an offer to take over as head of London-listed subprime lender Provident Financial. He is set to leave “later this year”, the bank said.

Asked by reporters on Tuesday, as the bank reported results for 2022, whether the ongoing bonus restrictions were affecting the search for the two senior positions, Mr O’Grady said: “It does have an impact. It doesn’t mean we can’t find top talent out there. But it makes it harder.”

Bank of Ireland said last month that it would introduce a staff bonus scheme next year based on the performance of the company and individuals, with maximum awards set at 10 per cent of an employee’s salary and capped at €20,000. The bank has not yet outlined plans for senior executive pay in light of the lifting of the €500,000 pay cap.

Mr O’Grady was already on a package of €960,000 before the limit was scrapped, as successive ministers for finance had allowed the bank to pay its top executive more than those in the other banks as it had avoided falling under State control during the financial crisis.