THE GOVERNMENT will seek a substantial reduction in bank executives’ pay, more credit for businesses, and a stay on home repossessions, before it consents to the €7 billion recapitalisation of AIB and Bank of Ireland, Minister for Finance Brian Lenihan has said.
Mr Lenihan said there was still much “tough talking” to be done before the Government was willing to sign off on the plan.
Mr Lenihan, speaking on RTÉs The Week in Politics programme, said the deal was not finalised and referred to senior executive pay in banks, which has been the subject of much public anger and criticism.
“The Government wants certain clear commitments from the banks in relation to lending to small enterprise, to securing people who are facing the threat of repossession and in relation to the whole area of salaries, bonuses and remuneration. We want to see dramatic reductions in the levels of these,” he said.
The decision on recapitalisation is expected to be made by the Cabinet at its meeting tomorrow. The decision is now unlikely to be announced until Wednesday or later.
Mr Lenihan said the Government has made a detailed assessment of the banks’ debts but it would observe due diligence before investing in the banks, as any investor would.
Speaking on the same programme, Labour Party leader Eamon Gilmore said the plan had to work or the taxpayer would have to pay the price. “If this does not work, the Irish economy will be in awfully serious trouble and the State will be in awfully serious trouble,” said Mr Gilmore.
Mr Lenihan also said it would be very difficult to make a case for increasing social welfare payments next year if the cost of living continues to fall. Asked if a cut in the payments was on the cards, he said any welfare payment reductions would be a retrograde step.
Fine Gael leader Enda Kenny said yesterday he will formally write to Taoiseach Brian Cowen this morning seeking an urgent meeting with him before a decision is made to recapitalise the banks. Mr Kenny said yesterday that his party was being asked to back the State plan for AIB and Bank of Ireland without any essential information being made available on the true financial position of the banks. The Fine Gael leader said he wanted an opportunity to look at the books of both banks and see what was involved before Fine Gael backed or rejected the proposal.
To that end, he said, he sought a meeting with the Taoiseach, the governor of the Central Bank and the Financial Regulator, in addition to an opportunity to be briefed on estimates provided by consultants PWC on the potential scale of bad debts in each of the banks, as well as their respective liquidity positions.
Mr Kenny’s spokesman later said there were serious concerns in the party over the scale of bad debts across the banking sector, and Fine Gael wanted assurances that the Government was not writing a blank cheque that would underwrite the debts of international speculators.
However, Government sources last night indicated that the request for a meeting with Mr Cowen, or access to the relevant figures, would not be acceded to before the decision was made. A spokesman would only say that the final proposals on recapitalisation had not been presented to Cabinet as yet and no decision had been made.
Mr Kenny yesterday called for significant reductions in the salaries of senior banking executives, as did Minister for the Environment John Gormley, who said they needed to be “slashed”.
The Government is expected to write to the boards of non-commercial State agencies asking them to review bonus arrangements for senior executives, following a decision to cut bonuses for top civil servants. The payment of performance bonuses to senior executives in State agencies has been a source of controversy on occasion.