The pay limit will apply to the chief executives of the seven financial institutions that are covered by the state’s €440bn guarantee scheme – Allied Irish Bank, Bank of Ireland, Anglo Irish Bank, Irish Life & Permanent, the Educational Building Society, Irish Nationwide and Postbank.
This represents a significant salary cut for the country’s leading bankers, with both outgoing BoI chief Brian Goggin and Irish Na-tionwide chief executive Michael Fingleton earning over €1m, while the top job in IL&P is worth some €890,000.
Already, some financial sources are predicting a mass exodus of senior banking management staff in the coming months because of the salary curbs.
A remuneration committee established by government to consider bankers’ pay, bonuses and pensions in the light of the current economic crisis has reported that in many cases they are markedly excessive.
However, it recommended higher salary levels than those finally set by government.
Irish finance minister Brian Lenihan, announcing his decision, described the €500,000 limit as appropriate given the continuing economic downturn, the financial positions of the banks and the salary caps set by the US and German governments for state-aided financial institutions.
And Lenihan warned that while he expected the banks to implement the new limit voluntarily, legislation to enforce it would be brought in if necessary.
The minister is already facing his first serious test on the issue, with the revelation that Fingleton was paid a €1m bonus shortly after the government introduced its guarantee scheme to protect the country’s banking system.
Lenihan is now demanding that this money be repaid, while the society claims the bonus was due under contract terms agreed last year.
Meanwhile, the Irish police force’s Fraud Squad has been sent into recently nationalised Anglo as part of an investigation that could lead to criminal charges.
Three issues are being examined – loans of €450m that AIB made to investors to take a 10% stake in the bank to support its share price, the movement of €7.45bn in deposits between AIB and IL&P to bolster AIB’s annual accounts and the apparent concealment for eight years of €87m in loans taken out by the former AIB chairman, Sean Fitzpatrick.
Against that background, and with bank shares still plummeting despite a €7bn state recapitalisation of AIB and BoI, it is perhaps understandable that ministers are feeling more than a little tetchy on this subject.
One senior government official, transport minister Noel Dempsey, has even compared some bankers with the hated Oliver Cromwell.
He told a recent party conference: “There is no parallel in history to the damage a small number of money manipulators have done to this country except perhaps Cromwell – and even he was motivated by reasons other than personal greed.”