Days of 'golden parachutes' in banking clearly over

ANALYSIS:AIB's redundancy offer pales in comparison with deals made early in the crisis at other banks

MONTHS LATER than expected, AIB finally disclosed the terms of the restructuring deal to be offered to staff, and they’re not nearly as attractive as the deals offered to Bank of Ireland or Ulster Bank staff who left those lenders early in the banking crisis.

The reasons are plain – AIB has since fallen into virtual State ownership and large “golden parachute” payments have become unacceptable given how the cost of the crisis has risen since then.

The two or three weeks’ pay per year of service (excluding statutory two-week payments) to be offered to bank staff compare with payouts of six or seven weeks’ pay in the first two years of the crisis.

The Government has intervened to rein in big redundancy payments, bringing them in line with terms on offer in the public service – for example, at the HSE.

Staff at AIB and its subsidiary EBS are still in the dark about where the axe will fall within the State-controlled bank in contrast to Ulster Bank, which has identified where 950 jobs will go.

AIB has said it will respond to the independent mediator’s recommendations for redundancy payoffs and terms next week.

Meanwhile, chief executive David Duffy is still developing his plans for the new structure of the bank, which has cost the Irish public a whopping €20 billion.

At Bank of Ireland, the Irish Bank Officials’ Association said the bank had told them a further 600 jobs would go over the coming months. This was on top of the 750 redundancies sought by the bank in July 2010 of which the bank has already secured 400.

So, if the IBOA’s estimates are correct, this means at least another 1,000 jobs will go at Bank of Ireland, which had 13,234 staff at the end of last year, down from more than 17,000 four years ago.

The bank’s chief executive Richie Boucher has said that fewer staff will be employed at the bank next year as the lender continues to shrink in size but redundancies will take place over time and not in a “big bang” announcement. The bank said the IBOA was speculating on the number of staff to go.

All this job-cutting is part of the massive downsizing required for the country’s bloated banks as they have to plan a return to profitability and self-sufficiency, and off the support of the State and the European Central Bank.

The IBOA wants a Government strategy to address the “continuing haemorrhage of jobs” across the financial services industry.

Among the next items in the plan to fix the banks is the inevitable increase in interest rates on loans. This is only a matter of time.