TOO LITTLE, far too late. That has been the Government’s consistent response to the evolving banking and fiscal crisis. It has damaged the financial independence of the State and the living standards of its citizens. But the most harmful consequence of all has been a failure, after two years, to hold those executives responsible for the banking disaster to account or to alter a culture of greed and entitlement within the banks. Even as welfare payments were cut in the Budget, bonus payments continued to apply within what are effectively State-owned banks.
Public fury over the deferred payment of €40million in bonuses to senior staff at Allied Irish Banks is understandable in current circumstances. But that is only one aspect of a corrosive culture. Minister for Finance Brian Lenihan banned the payment of performance-related bonuses at Irish banks in 2008. But a number of these organisations simply changed the goalposts and paid signing-on and retention bonuses to senior executives instead. The appalling weakness of the Minister’s position was laid bare in the Dáil when his intention to impose a tax of 90 per cent on all future bonuses was announced. The Finance Bill will not become law for a number of months.
The Central Bank found that in spite of the bailout by the taxpayer, banks continue to foster inappropriate risk-taking through their pay practices and policies, thereby exposing ordinary citizens to further losses. General secretary of the Irish Bank Officials Association Larry Broderick believes bonuses should not form part of future remuneration structures and was “flabbergasted” the Minister had only now moved to tax all such payments. He wondered what the Government had been doing for the past two years.
It is a question that should not be confined to Government. What have the boards of the various banks being doing? Or, indeed, what have the special directors appointed to those boards as representatives of the taxpayer been doing? The Central Bank report is damning. The link between remuneration and risk management remains poorly defined. Procedures to determine pay are not clear or transparent. And little or no consideration has been given to implementing new EU rules that take effect from next month.
At this late stage, the arrogance, conceit and greed of senior bankers should not surprise. But it does. There may be a reason: not a single one has been charged with wrongdoing. They appear untouchable. One wonders if they have learned anything from the financial disaster visited upon this State or accept responsibility for it.
When the Government was ‘‘bounced’’ into writing a blank cheque to save the banking system in 2008, it was expected that a complete clear-out of senior executives and financial boardrooms would follow. It has happened to only a limited degree. Worse still, those remaining in positions of power have not distanced themselves sufficiently from the old, discredited rules. That situation cannot be allowed to continue. The common good requires a fresh start and high standards.