Wednesday, 31 March 2021

Questions (64)

Mick Barry

Question:

64. Deputy Mick Barry asked the Minister for Finance his views on the continuation of the bankers' pay cap; and if he will make a statement on the matter. [17193/21]

View answer

Oral answers (6 contributions) (Question to Finance)

What are the Minister's views on the continuation of the bankers' pay cap? Will he make a statement on the matter?

The 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 small number of senior bankers whose pay is restricted by the €500,000 cap. These restrictions affect approximately 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 benefits such as health insurance and childcare, cannot be paid to any staff members from the most junior, lowest paid staff to, of course, the most senior ranks.

The previous Government reviewed this issue. Stakeholders engaged with included the major institutional investors in the banks, advisory firms, the Financial Services Union, the chairs of the remuneration committee in each of the banks, the Central Bank of Ireland and representatives of the Single Supervisory Mechanism. I acknowledge there is a very different environment in place now from a regulation point of view, which will help prevent the return to some of the excesses of the boom years.

Furthermore, the powers of the Central Bank were significantly enhanced by the Central Bank (Supervision and Enforcement) Act 2013, in particular powers to take action against wrongdoing by financial services providers and to strengthen the ability of the Central Bank to take action against individuals.

In the Minister's exchange with Deputy Doherty earlier, he made the point that Goodbody was not covered by the cap, that the State had no control over the remuneration it paid its top executives and that he was not proposing any change to the cap for AIB executives. However, what he did not deal with was the fact that if AIB takes control of Goodbody, then AIB executives can transfer over to Goodbody, and those executives can be paid €500,000-plus and the bankers’ bonuses without the 87% rate. They can find a way around the cap. The Minister indicated his support for that deal on that basis. I ask him whether he is prepared to reconsider his position on that, particularly given what the ordinary rank-and-file bank workers have to suffer at the moment.

The Deputy is correct that I did not refer to that in the earlier exchange but I did refer to it, I believe, in the answer I gave to Deputy Doherty. I certainly referred to it on the night of the debate on the banking sector in the Dáil a number of weeks ago on this and other issues.

The reason I support it is that if Goodbody is going to be integrated into AIB - and I believe that is the appropriate thing for AIB - it is part of what can offer a better future for the bank, the people who work for it, Fexco and Goodbody itself. If that is going to happen, there will be AIB people involved in providing some essential services within Goodbody or, indeed, playing senior management roles within Goodbody, and they will be paid as Goodbody employees. If I did not have a provision like this in place, we would end up with the potential for mockery and people leaving AIB and then going to work for Goodbody. That would be a dishonest position to present to the Dáil.

Unfortunately, the Minister’s very weak position on this issue is encouraging other senior bankers who want to drive a coach and four through the banking cap and find a way around it. At the Oireachtas finance committee recently, the CEO of Bank of Ireland, Ms Francesca McDonagh, was not prepared to discuss her bank's interest in Davy and what would happen if it was to purchase Davy, but was prepared to discuss a theoretical situation where the bank would acquire an entity, which we agreed to call entity B. She made precisely the point that if Bank of Ireland acquired entity B, it would be in favour of keeping the high rates for entity B and allowing executives from Bank of Ireland to transfer over and to avail of those rates as well, subject to the Minister's agreement. It would be kind of hard for him to oppose it when he has given it the green light this time around.

The reason I have agreed to this particular proposal is that I believe it is good for three Irish companies involved in it - for the company that was looking to sell Goodbody, for Goodbody itself and for AIB. These are all very big employers and are all companies that matter to the economy. Perhaps Deputy Barry is against that transaction happening at all. Although he is against the sale happening, we still have one Irish company looking to sell part of its company, that is, Goodbody. That sale was attempted on two different occasions but did not happen on either of those occasions. I believe it is in the overall long-term interest of those three companies that the sale happens, which is why I have supported this agreement. I came into the Dáil shortly afterwards and explained why.

In regard to what Bank of Ireland may or may not do, that is a matter for that bank and the decision it makes about any commercial process it is involved in.

Question No. 65 replied to with Written Answers.