Ireland Said to Be Open to Revisiting Limits on Bankers' PayBy
Ireland capped pay, banned bonuses at bailed-out banks
Tiered approach to focus on lower-paid bankers one option
Irish authorities may revisit caps on banker pay and bonuses at bailed-out lenders if the nation’s economic revival continues, two people familiar with the situation said.
The government has limited salaries to 500,000 euros ($598,000) and banned bonuses at banks rescued by taxpayers during the financial crisis. While there’s no proposal on the table, the policy may be reconsidered should wages across the economy keep rising, according to one of the people, who declined to be identified because no decision has been made.
One possibility is a tiered system that would allow some lower-paid bankers to receive bonuses, according to one of the people.
Pay and bonuses have been a lightning rod for public anger toward bankers in Ireland after billions of euros were spent saving failing lenders. Any change to the limits would represent another step towards normality in a nation that was one of the hardest hit during the financial crisis.
In May, then Finance Minister Michael Noonan reiterated that the pay cap remains in place. The finance ministry, now headed by Paschal Donohoe, on Tuesday said there are no plans “at present” to change current government policy on banker pay.
Some signs of flexibility are emerging, though. The government granted an exemption to Bank of Ireland Plc so it could pay incoming Chief Executive Officer Francesca McDonagh more than the limit when she joins from HSBC Holdings Plc in October.
“The case of the new Bank of Ireland CEO was exceptional and reflected the total compensation package of the retiring CEO, together with the experience and caliber of the successful candidate,” the finance ministry said.
In addition to the pay cap and ban on incentive-based compensation, the Irish government introduced a levy in 2011 that would result in an aggregate tax rate of 89 percent on bonus payments of more than 20,000 euros if they are reintroduced.
Rising pay across the economy might give the government more political space to ease the restrictions. Over the last five years, average weekly earnings have risen about 4 percent, according to the nation’s statistics office. In the second quarter, pay climbed 2.2 percent from the year-earlier period.
Some precedent exists for a tiered system. Allied Irish is awarding staff performance-related pay increases of as much as 3.25 percent, effective from April 2017 and 2018. The raise doesn’t apply to the lender’s leadership team, including Chief Executive Officer Bernard Byrne, according to a person familiar with the situation.