The Irish Times view on bankers’ bonuses: restrictions should remain
There is no public appetite for easing rules on ‘variable pay’ at bailed-out institutions
Just before stepping down as governor of the Central Bank, Philip Lane wrote to Minister for Finance Paschal Donohoe to suggest that there “may be merit” in allowing AIB, Bank of Ireland and Permanent TSB reinstate variable pay or bonuses for staff. Photograph: Nick Bradshaw
Just a day before stepping down as governor of the Central Bank to take up a senior role in Frankfurt with the European Central Bank, Philip Lane wrote to Minister for Finance Paschal Donohoe to suggest that there “may be merit” in allowing AIB, Bank of Ireland and Permanent TSB reinstate bonuses for staff.
“If executed effectively, variable pay can support and incentivise behaviours that are consistent with positive consumer outcomes, the execution of the banks’ business and risk strategies, corporate values and long-term interests, including guarding against excessive risk taking,” he said.
Under restrictions put in place after the crash, a salary cap of €500,000 applies at the bailed-out banks, while an 89 per cent tax is imposed on any bonuses paid by them. These rules were reviewed recently by consultants at Korn Ferry, although Donohoe has yet to either accept or reject its recommendations.
The Minister must be well aware that there is no mood among the public for a loosening of these pay restrictions. With a general election just around the corner, there would also likely be little appetite around the Cabinet table of this minority government to change the rules.
The memory of the €64 billion bailout of our domestic banks is still too raw. About half of this money has been written off, while AIB and PTSB have yet to repay their bailouts in full. Then there is the tracker mortgage scandal, which has highlighted the rotten culture within our banks.
Only last week, the Central Bank imposed a record €21 million fine on Permanent TSB for 42 regulatory breaches connected with more than 2,000 customers who were denied a low-cost tracker mortgage after the crash. Some 19 families lost their homes as a result of the bank’s actions. The other lenders here will walk the plank in time, with the final bill for penalties expected to run to about €350 million.
Against this backdrop, any move by the Government to loosen the restrictions on bankers’ pay or bonuses at this time would be wholly inappropriate.