Bank executives will have to wait until the State has sold its shares in the Republic’s financial institutions before the return of bonuses and the end of the €500,000-a-year pay cap, according to the Minister for Finance, Michael Noonan.
AIB recently raised the possibility of setting up an incentive plan to retain top executives and end the salary cap, in talks with Government.
The bank, which is 99.8 per cent State-owned, is heading for its first profitable year since taxpayers had to bail it out at a cost of €21 billion, following the near collapse of the Irish financial system in 2008.
However, a spokesman for the Department of Finance said yesterday the Republic's banks were unlikely to be allowed to reintroduce executive bonuses or end the salary cap, set at €500,000 in 2009, until the State had ended its involvement with them.
He pointed out that along with its shareholdings in AIB and Bank of Ireland, the State is still underwriting some deposits held in Irish financial institutions under the eligible guarantee scheme, which ended last year and is being wound down as its liabilities mature.
“The Minister’s position on this has not changed,” he said, adding banks would have to return to private sector ownership and the State’s interests in them be “completely removed” before this would happen.
Speaking in New York yesterday, Mr Noonan said while the State held 99 per cent of AIB, there was "no point" in the bank raising the bonus or pay issue with him in the first place. "It makes no sense, and it's not a demand that I'm prepared to deal with," he warned.
Visiting Bloomberg’s headquarters, the Minister told the news agency a much better performance would be required from AIB before he would even consider bonuses.
“If any executive wants to leave AIB I’ll shake his hand and wish him fair passage as he leaves,” Mr Noonan added. The bank made no comment yesterday.
Bonuses and excessive salaries were seen as central to the culture that fuelled the property bubble that proved almost fatal to the financial system, and, in turn, forced the Government to bail out the indigenous banks at a cost of €64 billion.
As a result the State ended up owning the now defunct IBRC (formerly Anglo Irish Bank), virtually all of AIB, which swallowed its smaller rival EBS, and a stake in Bank of Ireland that stands at 15 per cent.
Any move by the State- owned or supported banks to reintroduce bonuses would be likely to spark a public outcry.
Mr Noonan also said yesterday that Bank of England governor Mark Carney told him at last week's World Economic Forum in Davos that Ulster Bank's position in the Republic won't change as part of a wider review of its owner RBS that is due to conclude next month.