Fine Gael’s finance spokesman Richard Bruton has said the salary cap for top bankers must remain in place as long as the banks are being “propped up” by taxpayers.
Mr Bruton was commenting on remarks made by recently appointed Central Bank Governor Patrick Honohan in which he called for the Government-imposed ceiling on bank executives’ pay to be removed.
Mr Bruton said bank directors should never expect to return to “the free-wheeling days of massive salaries and excessive bonuses, all paid for by reckless gambles that banks took with money from depositors, and ultimately from taxpayers”.
“Over the last 14 months, Irish banks have been bailed out with billions of taxpayers’ money, and are still enjoying the benefits of a €400 billion guarantee.
Under no circumstances should any bank director expect the salary cap to be lifted for as long as banks continue to be guaranteed and propped up by taxpayers and until banks have restored the lost trust in their capacity to prudently manage and lend out people's savings,” Mr Bruton said.
The Government imposed a salary cap on bankers as part of the rescue of top lenders including Allied Irish Banks and Bank of Ireland.
Mr Honohan, who took over at the helm of the central bank in September, suggested salary limits could make it difficult to provide the incentives needed to recruit the best people.
"Around the world, people are becoming less keen on absolute ceilings on earnings," Mr Honohan told the Irish Independentin an interview conducted on Monday.
"If you do that, you can end up losing the people you want to keep."
Yesterday, AIB ended a row with the government over executive appointments and pay, installing Colm Doherty as managing director with a salary of €500,000, the highest allowed under the terms of the bank's State bailout.
"The focus in other countries is already on reducing the payment of short-term bonuses, before the consequences of executive decisions become clear," Mr Honohan said. "We have to try to align the incentives for chief executives of banks with the common good of the community."
Under the National Asset Management Agency (Nama), about €54 billion in bonds will be paid to cleanse banks of risky property loans, with the bonds to be cashed in by the European Central Bank.
Mr Honohan disagreed with the suggestion that Irish banks would require emergency ECB support for the indefinite future.
"The Irish banks are not getting special treatment," Honohan said. "They have lots of good collateral that they can use for normal loans from the ECB. I think the €54 billion in Nama bonds will be of more use in the wider financial markets, because they are government guaranteed."
Reuters