SHEEHY:ALLIED IRISH Banks chief executive Eugene Sheehy has said he retains the support of the Government and the institution's entire board in his position and will not accept any pay increase or bonus for the remainder of his career with the bank.
Mr Sheehy’s remuneration package was worth a total of €2.1 million in 2007, €358,000 lower than the previous year.
Interviewed last night, he said he has deepened a pay cut to 25 per cent of his salary from a 10 per cent figure agreed last October and will not receive any bonus in respect of the bank’s performance last year. “I have told the board that I would not accept any pay increase or bonuses for the rest of my career.”
He said AIB was “grateful” for €3.5 billion from the State and believed it would suffice to see the bank through the economic cycle, stating that the new capital would provide a “substantial buffer” for the next three years.
He cited the diversity and sustainability of the bank’s earning capacity – with operations in Ireland, Britain, the US and Poland – and the increase in the bank’s core tier-1 capital following recapitalisation.
“There is a good return for the taxpayer coming out of that,” he said in respect of the State’s commitment to the bank.
Mr Sheehy conceded that his bank had made mistakes in respect of some of its lending practices, but declined to specify the lending sectors in question. He committed the bank to lend to businesses and home loan applicants, where appropriate, following recapitalisation.
The nationalisation of Anglo Irish Bank changed “sentiment” in the market when AIB started the process of raising €1 billion in new ordinary capital at the start of the year. Asked when the bank will seek to raise the €1.5 billion mooted in last night’s package, he said there was a “tough call” to make in that regard. While a global change of sentiment was required in respect of banks generally, he took confidence from the diversity of the bank’s operation.
AIB had no plans to sell its 25 per cent stake in US lender MT to raise capital, he said, adding that to do so would be to surrender valuable earnings.
“Earnings are valuable in the current environment. We’d be giving away diversity. Diversity is one of our key strengths.”
On the possibility of an extension of the State’s two-year guarantee on the liabilities of the entire system, he said that hadn’t featured in the bank’s discussions with the Government. However, he said “we welcome that the Government have indicated some kind of ongoing support”.
Mr Sheehy declined to say whether he favoured the introduction of a scheme to insure banks against “toxic” loan losses or the creation of a “bad bank” to house weak loans or a mixture of both.
Stating that a successful scheme along those lines had yet to be invented in any market, he said the fundamental fact that loan losses led to an erosion of capital would not change.