Government to get report on potential removal of bankers’ pay cap

Officials say €500,000 limit causes senior management to go elsewhere for higher pay

The Minister for Finance Paschal Donohoe will receive advice from the Central Bank on the potential removal of the €500,000 pay cap on bankers' pay this week.

The pay cap, which was put in place by then-minister for finance Brian Lenihan in 2009, has been blamed for the difficulties encountered by Irish lenders in retaining senior staff. However, any move to remove it could prove to be politically controversial.

Speaking at the Public Accounts Committee, Department of Finance officials confirmed the department had received a report on the matter from consultants Korn Ferry, which it commissioned to look into the issue last year. The report was sent to the Central Bank for its input on whether the bankers' pay cap could be affecting the integrity of the financial system, Mr Moran said, and whether there might be "a threat to the viability and stability of those banks" affected.

It is understood that the Central Bank governor will send a letter to the Minister for Finance shortly. The letter will address issues raised in the Korn Ferry report on banker remuneration, including the pay cap and financial stability.


"We understand the reasons for a pay cap but we are seeing large chunks of senior management in the banks in which we have shares being taken out and go for higher pay elsewhere," secretary general Derek Moran told Fianna Fáil TD Marc MacSharry on Thursday.

Mr Moran and his officials said that the "massive increase in the size of the financial system" in the Republic, coupled with the "Brexit bonus" is leading bankers to move to financial institutions which are not covered by the cap. AIB, in which the state owns a stake of around 70 per cent, lost its chief executive, Bernard Byrne, to stockbroking firm Davy last year. Mark Bourke, the bank's chief financial officer, stepped down last year for a position overseas.

Mr Moran said that he anticipates the report will be with Mr Donohoe for consideration “in the next number of weeks”.

Apple legal bill

The department also said that the legal bill for defending the Apple case taken by the European Commission could increase "significantly" in the coming years.

The State has already spent around €7.1 million on the case so far, with €3.7 million of that related to the establishment of an escrow account. The Department of Finance has spent €2.3 million on legal bills so far alone.

“It has the potential to be significantly more than that,” Mr Moran said.

He told Fine Gael deputy Peter Burke that while there were no official projections for how much the bill would cost the state, the size of the amount concerned and the importance of the case meant that "there's nothing quite like this" in the history of state aid cases which have been fought between the commission and a member state.

Costs so far have primarily been on the setting up of the escrow account, legal costs, translation services, and a smaller sum of around €65,000 on other services. Mr Moran said that he doesn’t expect the Apple case to go on for as long as the longest state aid case on record, which started in the 1990s and is ongoing, but that it is “a complex issue which is going to take several years”.

Mr MacSharry also challenged the department officials on why they had not complied with a previous request from the PAC to appoint a committee to monitor the liquidation of the Irish Banking Resolution Corporation (IBRC). Under the Act passed to facilitate that legislation, no committee is required. However, debt campaigner David Hall has launched a High Court case alleging that there was not proper oversight over fees to be paid to IBRC liquidators KPMG. The liquidation team has received €144.9 million in fees to the end of last December.

Mr MacSharry said that in the absence of a committee, the taxpayer would be unable to assess the performance of the liquidators at the end of the process. “The people are entitled to it . . . and as things stand, I’m not even sure there’s anyone in the Department of Finance that has the detail available to them that an ordinary creditor or stakeholder would have.”

The committee agreed to invite in Mr Hall to discuss his case, alongside the economist and commentator Constantin Gurgdiev, who has written a report on the matter for Mr Hall.

Jack Horgan-Jones

Jack Horgan-Jones

Jack Horgan-Jones is a Political Correspondent with The Irish Times