Dáil Éireann Debate, Wednesday - 19 June 2019
44. Deputy Joan Burton asked the Minister for Finance his plans to lift the €500,000 pay cap for workers in the banking sector; the reports he has commissioned on the matter; his further plans to make such reports public; when such reports will be published; and if he will make a statement on the matter. [25317/19]
View answerThe Deputy will be aware that Government policy on banking remuneration has remained unchanged since the financial crisis. Extensive restrictions are in place and these are not simply confined to a handful of senior bankers whose pay is restricted by the €500,000 pay cap (excluding a standard pension contribution). These affect c.23,000 workers across the three banks in which the State has a shareholding. The policy dictates that variable pay including bonuses and any other fringe benefits including the likes of health insurance and childcare cannot be paid to any staff members from the most junior lowest paid staff to the most senior ranks.
A new regulatory framework has been put in place since the financial crisis across the EU, the economy has returned to near full employment, the remaining banks are profitable again – and in the case of AIB and BOI sustainably so. The State remains the largest shareholder in AIB, BOI and PTSB but following the successful IPO of AIB in June 2017 all three banks are also now on an equal footing with listings on the main market of the Irish and London stock exchanges.
The skill set required in the banking sector is evolving with the greatest demand for staff now in areas such as the digital economy, risk management, legal and compliance. These skills are in demand right across the economy and so the banks are competing for this talent against companies who have more flexible and attractive remuneration structures. Brexit has only made this problem more acute.
In the senior ranks of the banks the substantial disparity in pay levels versus other Irish listed companies or peer banks in Europe is stark and introduces an obvious retention risk particularly in AIB and Bank of Ireland. I also need to be advised if this retention risk and a lack of alignment between the interests of executives and shareholders, undermines the Government's objective of recovering the State’s full investment in the banks.
As a result I undertook last year to carry out a review of Government bank remuneration policy to determine if it remains fit for purpose. My department held a full open EU public procurement to select a suitably qualified external consultant to assist it in completing this review. The specialist advisory division of International Firm Korn Ferry was subsequently appointed.
Engagement with a broad set of relevant stakeholders was an important part of the process. Stakeholders engaged with by Korn Ferry and my department included the major institutional investors in the banks, proxy advisory firms, the Financial Services Union (FSU), the chairs of the remuneration committee in each of the banks and representatives of the Single Supervisory Mechanism (SSM) in Frankfurt.
I felt it was also important to get the views of the Central Bank on this matter. I note the response from the Governor of the Central Bank in this regard which is available on the Central Bank's website. I have now received the report and once I have considered it, my intention is to publish it in due course.
