Minister for Finance Minister Paschal Donohoe asked for a three-week postponement on the final sale of the State’s stake in AIB so he could consult government about the bank’s exit from “crisis relationships”.
Senior officials had sought permission to carry out a “clean-up share disposal” on May 23rd to finally end state ownership in the bank after the financial crash.
However, the Minister looked for extra time as officials said the sale would “inevitably refocus the discussion around the topic of remuneration” and the salary cap for bankers.
In a note on the submission, Mr Donohoe wrote: “I am absolutely committed to the return of AIB to private ownership. However, I want to exit from crisis relationships with [the] bank at same time.
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“I will need to engage with government on this and will not have this complete by end of this week. Ask department to consider execution of same plan but in second half of June.”
[ How AIB went from boom to bust and back againOpens in new window ]
In mid-June, officials submitted a second submission on the sale saying it would “trigger an opportunity re: salary cap.”
It said the State was looking to offload nearly 44 million shares and hoped to bring in around €310 million through the sale.
The submission said: “The implication of this trade is that it will trigger an expectation to begin unwinding the crisis-era remuneration restrictions that remain in place (in particular the removal of the salary cap).”
Officials wrote that AIB was one of the best performing banks in Europe and that strong momentum had continued since the last time the State sold some of its shareholding. It said the final sale would represent a “natural point” to normalise the relationship between AIB and the State.
The submission also cautioned that if pay restrictions from AIB were removed, it should also apply to PTSB.
“Absent of that happening, it would put PTSB at a severe disadvantage,” said the document. “Such a scenario is not in taxpayers’ interests.”
In a note, Mr Donohoe wrote: “I agreed to this process via phone yesterday. This is to indicate that approval was given and to conclude official documentation.”
A separate presentation on the State’s post-crash investment in banks said the taxpayer had invested €29.4 billion in AIB, Bank of Ireland, and PTSB.
From that, around €28.7 billion had been recovered although this was over an extended period of a decade and a half.
The presentation said as well as implications for the salary cap, other restrictions on how AIB operates would change. One slide said: “These restrictions include monthly meetings with senior management, access to board papers, [and] various reporting/consent/consultation requirements.
“Since the State’s exit from BOI (Bank of Ireland), that bank is no longer subject to these conditions. We recommend putting AIB on an equal footing with BOI in this context.”
On pay caps, another slide said all restrictions were eliminated for Bank of Ireland apart from bonus payments exceeding €20,000 per year.
“While restrictions around variable pay up to €20,000 and fringe benefits were also removed for AIB and PTSB, both banks continue to abide by the total compensation cap of €500,000 per annum that is currently in place,“ it said.
This additional restriction relative to Bank of Ireland was “anti-competitive and unsustainable”.
