New EU rules could impose pay cut on Bank of Ireland CEO if it gets additional State cash

New European Commission state aid rules on bankers' pay could result in Bank of Ireland chief executive Richie Boucher having to take a significant reduction in his remuneration in the event of the company needing more capital from the Government.

Banks that receive state aid after August 1st will be subject to strict caps on executive pay, the commission has decided.

Under the new rules, published yesterday, the total remuneration of any individual may not exceed 15 times the national average salary in the country in which it is incorporated, or 10 times the average salary in the bank where they are employed. The cap should include “all possible fixed and variable components and pensions”.

According to the CSO, Ireland's workers earned an average of €36,079 in 2012. This suggests a cap under the commission's rules of €541,185.

10 times rule
When the 10 times rule is applied to the average salary of Bank of Ireland staff in 2012, the figure comes to €524,200.

Mr Boucher earned €843,000 in 2012, including a salary of €690,000.

A cut in remuneration would only apply in the event of Bank of Ireland requiring another financial bailout by the State.

While there is currently nothing to suggest that the bank will need more money from the State, new stress tests for Irish banks in the first half of next year could throw up a requirement for additional capital and trigger these new rules.

Bank of Ireland still owes the State €1 billion from the bailout it received after the crash of the financial sector in 2008 and is 15 per cent owned by taxpayers.

No comment was available from Bank of Ireland yesterday in relation to the commission’s decision on pay.

The remuneration of AIB chief executive David Duffy is broadly in line with the commission's rules.

Average salary
Ten times the average salary last year at AIB comes to €534,440. Mr Duffy was paid €546,000 last year by AIB, including a salary of €475,000.

AIB is more than 99 per cent owned by the State.

Restrictions on pay are currently decided on a case-by -case basis by countries. In Ireland a cap of €500,000 at State-supported banks is enforced.