AIB criticised over slow response to EBS bonus refusal

A SENIOR Department of Finance official criticised AIB management in an internal email for their slow response to the department’s refusal to sanction a “Christmas bonus” payment to non-management staff at the bank’s subsidiary, EBS.

About 370 staff at EBS were told by management just three days before the money was to be paid last December that the bonus could not be paid under the terms of the State’s €13 billion recapitalisation of AIB/EBS last July.

Records show that the “bonus” payments were raised at a meeting between AIB and the department on October 20th and officials told the bank on November 8th that the terms of the placing agreement applied to EBS.

Staff were told early in December they would not be getting the payment.

Neil Ryan, an assistant secretary at the department, told colleagues in an email dated December 7th, 2011, that it was “clear cut” from the day the issue was raised that the bonus could not be paid under the Government’s “placing agreement” with AIB.

“The management was (as per [an] earlier note) slow to follow up on the point and seemed to drag the topic out until the last minute,” Mr Ryan said in response to up to 15 complaints from EBS staff on the day they were told the bonuses were not being paid.

Earlier on December 7th Helen Quane, who works in the Minister for Finance’s office, raised a query on behalf of a caller, whose identity was redacted by the department, asking why the payment was blocked three days before staff were due to receive the money.

Officials reacted in particular to a letter of complaint from an angry EBS staff member who told the department that employees had been advised that the Minister personally made the decision to withdraw the bonus.

Department official Sean Kinsella told Mr Ryan in the previous email that he wanted to draw his attention to “the assertion that the Minister was personally the decision maker here – if true – gives you an insight into what mgt (sic) are saying.”

Staff were furious that they were not given more notice that the money would not be paid. Records relating to the payments were released by the Department to The Irish Times under the Freedom of Information Act.

AIB chairman David Hodgkinson and chief executive David Duffy wrote to John Moran, head of the banking policy division at the department, on December 16th suggesting ways to resolve the matter and avert a one-day strike the following week.

“This planned action is regrettable but not entirely unexpected due to the cessation of a longstanding practice of payments made to EBS staff every December,” they said in a letter copied to the Minister for Finance.

“For almost 20 years, these payments were being made to staff below the rank of manager, whose average salary is €32,000. The payments continued to be paid in 2008, 2009 and 2010, following receipt of State aid by EBS.

“Cessation of payments was only triggered when AIB acquired EBS.”

Details of AIB’s proposals on a “suggested future path” were withheld by the department, which also refused to release Mr Moran’s response three days later.

The department said that it was formally asked by the bank on November 25th whether the “bonuses” could be paid. Law firm Arthur Cox advised the department that no bonuses could be paid under the Government’s agreement with AIB.

“AIB’s management would have known that no bonuses could be paid when they signed the placing agreement – no AIB employees is (sic) getting a bonus – and that also applies to EBS,” said Mr Ryan in another internal email on December 7th.

The dispute over the “bonus”issue was settled earlier this month when it was agreed that staff would be paid half the payment and a €4.8 million contribution would be made to the EBS pension scheme.

Of 34 records listed by the department relating to payments, officials refused to release nine, while 15 were released only partially. Ten records – comprising mostly material in the public domain – were released in full.