Lenihan presses AIB to make new head an outsider

MOUNTING POLITICAL opposition to the appointment of an internal candidate as chief executive at Allied Irish Banks (AIB) was high on the agenda at a meeting of the bank’s board yesterday.

The Government has signalled that it is anxious for an external candidate to be installed at AIB to avoid the criticism that followed the appointment of Richie Boucher, an internal candidate, at Bank of Ireland earlier this year.

The bank’s board is believed to keen to appoint an internal candidate, Colm Doherty, head of the bank’s capital markets division, to succeed Eugene Sheehy, who announced his intention to retire earlier this year.

Minister for Finance Brian Lenihan wants an external candidate appointed as political pressure grows in the Government’s attempt to win public support for the Nama “bad bank” plan.

A non-executive director of the bank, Sean O’Driscoll, met the Minister on Monday to discuss the appointment and it was again indicated that the Government wanted an outsider.

A spokeswoman for AIB had no comment on the nature of discussions at the meeting and said that the bank was in continuous dialogue with the Government.

“We are looking internally and externally,” she said. A spokesman for the Minister had no comment.

The race to succeed Mr Sheehy is understood to be down to two candidates. Mr Doherty faces competition from an external candidate described as “very strong” by observers close to the process.

The bank’s efforts to appoint an internal candidate have been complicated further by the Green Party’s changes to the Nama Bill, which propose that all directors of financial institutions participating in Nama, if appointed before 2008, will be forced to step down.

The party says that under changes to the legislation any directors appointed before 2008 “will be replaced over the course of two years to allow for an orderly changeover of management”.

Mr Doherty has been a member of the AIB board since 2003.

He has been credited with maintaining a strong and consistent performance for the bank’s capital markets division as AIB’s main Republic of Ireland division incurred heavy losses as a result of property and development loans.

The Government has 25 per cent voting rights on boardroom appointments at AIB through its €3.5 billion investment and can exert significant pressure on the bank in advance of Nama buying an estimated €25 billion of bad and risky loans from the bank. AIB is likely to cede a majority stake to the Government due to losses incurred under Nama.

The recruitment process to find a new chief executive has been ongoing since the end of April when Mr Sheehy decided to retire.

Government sources have acknowledged the bank’s difficulties in securing an external candidate given the State’s €500,000 cap on the chief executive’s salary.