ALLIED IRISH Banks successfully lobbied Minister for Finance Brian Lenihan last year for permission to pay bonuses to overseas staff and those with pre-existing contracts for bonus payments.
Under an agreement reached following the bank guarantee scheme, the main banks agreed to reduce the pay of senior executives and to cease the practice of paying bonuses for a limited period.
However, AIB last year sought permission to pay bonuses to overseas staff, those based in subsidiaries and employees below senior executive level who had contracts which included bonus payments.
After considering the issue last October, the Minister for Finance agreed to bonuses for those with pre-existing contractual rights.
This, he said, was on the basis on “not being a return to business as normal”. It was also conditional on them undertaking to report on activity at the bank on a quarterly basis.
He insisted, however, that no bonuses be paid to senior executives, in line with the recommendations of a Government committee on bankers’ pay. AIB subsequently paid bonuses last year to overseas staff in the bank’s capital markets division in respect of 2008.
Bonuses were also paid to staff in its Polish subsidiary, BZWBK (which was not covered by the bank guarantee scheme) and in its Channel Islands-based business. A number of staff in AIB’s call centre were also paid bonuses, according to Department of Finance documents.
Minutes of meetings between AIB and department officials last summer show that the bank said it had legal difficulties with staff in the capital markets division who argued they were entitled to bonuses. It also said that head-hunting of key personnel was occurring due to its inability to pay bonuses to key staff.
Officials in the department responded that a commitment had been given by AIB following recapitalisation by the State that no bonuses to any staff would be paid.
However, in light of the points raised, the department would examine the basis for paying bonuses in respect of workers who had pre-existing contractual commitments.
The minutes of the meeting add: “The suggestion that other bonuses falling outside of this criteria would have their payments ring-fenced to be paid at a future date was not warmly received by Finance and is a matter for possible future discussion.”
Other documents released under the Freedom of Information Act show that a total of four banks were paying senior executives cash allowances to compensate for the effects of a pensions cap introduced by the Government.
These banks were AIB, Bank of Ireland, Anglo Irish Bank and Irish life & Permanent.
The practice was criticised last year by a Government-appointed committee set up to assess bankers’ pay. It did not name the banks involved, but said it was “unacceptable that arrangements should be put in place which would be inconsistent with the intent of the relevant legislation.”
Mr Lenihan wrote to the four banks last year requiring them to immediately cease paying these cash allowances and to introduce a basic salary cap of €500,000 for chief executives.
He directed that remuneration should be reduced in line with the Government’s position and that any deviation should only be in exceptional circumstances and with his approval.
In addition, he reminded both AIB and Bank of Ireland – who signed special agreements during the course of their recapitalisation by the Government – of an agreement to cut the salaries of senior executives by one-third.
In the case of Anglo Irish Bank, he agreed to an increase in pay levels for the chairman – then Donal O’Connor – from €218,000 to €250,000, while non-executive directors’ fees were increased from €44,000 to €73,000.
Mr O’Connor was replaced by former Fine Gael leader Alan Dukes several months later.
However, as reported in The Irish Timesearlier this year, Mr Dukes took a €100,000 reduction in his fees because he was receiving Dáil and ministerial pensions.