Treasury Secretary Paschal Donohoe would probably have preferred to be at least a minority shareholder in AIB and Permanent TSB before addressing the thorny issue of increasing bankers’ salaries.
ut the long-awaited report on retail banking his department produced last year put the topic back at the center of his agenda just before his change of job in December.
The review recommends easing the €500,000 cap on bankers’ pay and allowing bonuses of up to €20,000 for bank employees, a change that practically needs no legislation.
The changes, if approved by Cabinet, would make the issue of banking sector pay after 13 years of government ownership more of a commercial decision than a political consideration.
This is welcomed by bankers and bank shareholders, who have been calling for more discretion in payment for years.
But any change in favor of this cohort is likely to draw public anger. A sector that cost the country so much could now receive rewards unattainable for many of the taxpayers who bailed it out.
But wage restraints have become increasingly unsustainable as economic and market conditions have changed in the decade since the worst of the financial crisis.
In short, Irish banks are getting back to normal. And in banking, normal means lots of money and bonuses as part of the package
As the economy recovered, so did the value of bank stocks, allowing the National Treasury Management Agency (NTMA) to phase out government holdings in Bank of Ireland (BoI), AIB and Permanent TSB (PTSB).
This happened first with multi-billion dollar big bang IPOs for AIB and PTSB. This was followed by other piecemeal divestitures in recent years, leading to the privatization of BoI.
AIB now has only a 57 percent state stake and the minister could be a minority owner as early as the new year if market conditions are favourable.
Soon, British bank NatWest will become a large owner of PTSB shares as part of its agreement to pull Ulster Bank out of the Irish market. It will be a counterbalance to the Irish government.
In short, Irish banks are getting back to normal. And in banking, normal means lots of money and bonuses as part of the package.
The writing was on the wall when AIB bought Goodbody in 2021 with Mr. Donohoe’s blessing. The deal included a compensation spin-off for the well-paid traders, money managers and rainmakers on the venerable stockbroker’s books. A similar exception was made when BoI bought Davy.
Why, the bankers of these institutions might reasonably ask, should a stockbroker escape payment restrictions, even if owned by a bank?
Former BoI CEO Francesca McDonagh, who moved to a lucrative position at Credit Suisse two months ago, has repeatedly criticized bankers’ salary caps as a counterproductive burden on performance and ultimately bailout payback.
“It’s not just for high-paying roles like CEO or CFO,” Ms. McDonagh said in August. “It is also for the 9,000 colleagues in the bank. We cannot adequately reward excellence or incorporate new achievements into compensation packages.”
She said the wage restraints meant banks have struggled to compete for talent with unrestricted companies in other sectors, particularly in technology, where banks have desperate needs and obvious shortfalls.
In addition, BoI kept losing C-level executives due to much more enticing salary packages at other (non-bank) companies. Current BOI boss Myles O’Grady took a well-paid sabbatical at Musgrave before getting the top job.
As much as the typical PAYE worker might not like it, we’ll probably get our money back from the banks quicker if we relax wage rules.
Investors want it, which means higher stock prices, which means more opportunities to sell our holdings and finally get out of banking.
https://www.independent.ie/irish-news/it-may-be-hard-to-stomach-but-the-loosening-of-restrictions-on-bankers-pay-was-on-the-cards-42180662.html It may be hard to take, but the easing of restrictions on bankers’ pay was on the horizon