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Banking Sector Remuneration

Dáil Éireann Debate, Tuesday - 2 July 2013

Tuesday, 2 July 2013

Questions (69, 102)

Seán Fleming


69. Deputy Sean Fleming asked the Minister for Finance when the banks will commence implementation of measures relating to the Mercer report; if he has received an indication of the nature of the measures to be implemented; and if he will make a statement on the matter. [31908/13]

View answer

Brian Stanley


102. Deputy Brian Stanley asked the Minister for Finance the proposed actual reduction in salaries to those earning above €200,000 in the AIB’s proposal to the Minister following the Mercer report. [31885/13]

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Oral answers (4 contributions) (Question to Finance)

I propose to take Questions Nos. 69 and 102 together.

As I have explained in previous responses to questions on this matter, discussions are ongoing at three banks - AIB, Band of Ireland and Permanent TSB - in response to the Government's decision that they were to come up with plans on how they intended to achieve savings of 6% to 10% of total remuneration costs. It was an inescapable conclusion arising from the review of remuneration practices and frameworks at the covered institutions, a report commissioned by the Government in response to a programme for Government commitment that the cost base of the institutions needed to be reduced further. This is essential if they are to return to profitability, be in a position to support the economy and repay the State's investment through a return to private ownership.

In requesting this, I was not prescriptive in how the target was to be achieved, respecting the banks' differing levels of State ownership and paths to profitability. I am not neutral on the method they may use to achieve the savings and must be satisfied that the terms of the Government decision will be honoured. However, there is a wide tolerance as to how the required reductions will be achieved.

Each of the banks submitted its outline plans to me by the due date requested. As a consequence of the ongoing negotiations, some of which are quite far advanced, it is not possible at this stage to reveal precise individual details bar what has been put into the public domain. In that vein, I can confirm that all three institutions have put forward pension changes to varying degrees as part of their overall responses.

My abiding mantra in dealing with these matters has been to insist that the normal industrial relations protocols and consultation procedures need to be observed by all participants. I am anxious, therefore, that all parties to these discussions are afforded the necessary space and time to conduct and conclude these critical negotiations.

I have put on the record that the Government readily acknowledges the sacrifices and changes made by bank employees to date at all levels and recognises that this has been achieved without major industrial unrest in what is a critically important sector. However, there can be no doubt that whatever emerges from the respective talks will present some unpalatable measures for those concerned and will require reflection from them and their representatives.

The cost bases of the banks must be reduced and remuneration costs must come down. While it would not be appropriate or realistic to specify a timeframe for the savings to be delivered, it is clear that the timely delivery of such savings is critical.

I thank the Minister for his reply. We had an exchange on this matter during our last session of finance questions. I am not naive enough to believe that there would not be pain for all bank employees. Clearly, there has already been pain and there will be more. In particular, difficult decisions about pension schemes have been made. In the case of Permanent TSB, for example, these decisions are pending the outcome of Labour Court negotiations. People acknowledge that the banks need to reduce their cost bases but they want a key principle to be observed, namely, those at the top should lead by example and the impact of the reduction should be graduated accordingly.

I sought this commitment from the Minister previously. He has used some of the terms that arose during our previous exchange. For example, he stated that he was neither neutral nor prescriptive. I respect that a process is ongoing, although I would take issue with the manner in which some of the banks have proceeded, namely, making unilateral decisions in the absence of agreement and pending the outcome of the industrial relations machinery.

Will the Minister insist that middle and senior ranking executives lead by example - the Taoiseach gave this commitment in the House some months ago - and that the impact of the reduction in the cost base be graduated accordingly? Can we take it that this will be the abiding principle used in the implementation of the Mercer report?

The taxpayer spent €120,000 on the Mercer report and the public expected that senior bankers would see reductions in salaries. My question was specific, in that it related to base salaries. At AIB and Bank of Ireland, 257 individuals are on remuneration packages of more than €200,000. Some 2,500 are on remuneration packages of more than €100,000.

I want the Minister to lay my fears to rest. My understanding is that the hundreds of senior bankers at AIB, for example, who are in receipt of more than €100,000 will not take a cut to their base salaries. Their pensions will change, but their pay will remain intact. The Minister knows the details and has been looking at the banks' proposals for a couple of months. Is there a proposal for high earners to take a reduction in their base salaries?

I have asked that payroll costs be reduced by between 6% and 10%. I am interested in reducing the cost base of the banks for all of the reasons of which everyone is aware. I am not as interested in retribution or vengeance as Deputy Pearse Doherty. That is a different objective.

We have received the first round of replies from the banks. These deal with a range of issues. The banks are negotiating internally. As they do so, they will keep me informed. I will inform the House of the result of the negotiations after they have concluded. The principle is one of a reduction in payroll costs of between 6% and 10%, as the banks that were kept alive by the taxpayer cannot be exempt from cutbacks that are being applied elsewhere while the taxpayer is taking pressure across a range of expenses.