SG
With new EU rules on banker pay coming in to play next year, Irish banks could potentially raise base salaries in order to compensate for reduced bonuses, or risk losing key staff in profitable business areas to competitors overseas.
Irish banks have been a little tardy when it comes to tightening up pay practices. As a scathing report from the Central Bank of Ireland this month showed, signing on bonuses, guarantees and golden parachutes were still commonplace.
The Central Bank is shortly to release its draft remuneration code, which will draw on the recommendations of the Committee of European Banking Supervisors (CEBS).
Now, the CEBS bonus rules are complex (our UK site offers a helpful summary on the finalised report here), but fundamentally they require deferrals, stock payments over cash and a crackdown on guarantees.
The Irish government has forced AIB to rescind its €40m deferred 2008 bonuses and is set to impose a 90% super-tax on future payments within banks under the guarantee. Clearly, in Ireland, banker pay is both a political hot potato and a source of bubbling public anger.
“In order to be compliant, the Irish government or financial regulator needs to bring forth some final regulation that takes into account the CEBS guidance,” says Jon Terry, remuneration partner at PricewaterhouseCoopers. “They might decide to make an exception in this regard, but this would be something of a red rag to a bull.”
The CEBS guidelines have been on the table since October and, in the UK at least, also follow recommendations from local regulators. Therefore, most investment banks in the City have raised base salaries this year – some times three or four times higher than 18 months ago – in a bid to remain competitive globally when it comes to pay.
“If Irish banks want to keep the total compensation for certain key individuals at the same level, but outside of the guides, then increasing salaries is an option,” says Terry. “They need to take account of the political dimensions of that, but if these people work in an international marketplace there’s a need to remain competitive over compensation. I wouldn’t rule out a salary rise.”
In reality, as long as it has control of the purse strings, the Irish government is unlikely to risk the wrath of the public in order to keep hold of key people in capital markets and other profitable divisions of the domestic banks.
Therefore, Irish banks face the distinct possibility of this talent hopping on plane to London or Asia.
I think Irish hospital consultants should be paid the same as toilet cleaners….
It would be a brave HR manager that takes the decision to raise base employee salaries in the current climate – that’s akin to raising state funded salaries and you’d need to cover your back 10 fold.
Anything a HR manager said to me I would assume was a lie……
Someone should write a book or an academic case study on what happens to AIb’s dealing floor next……
call it “How to ruin a business in 3 easy steps..!”
I’m guessing but Dublin salaries must be less than 33% of those in London now ? That cant last ?
“I’m guessing but Dublin salaries must be less than 33% of those in London now ? That cant last?”
Unless these divisions are sold and sold quickly the trading rooms will be scaled down dramatically – to gamble investors funds is one thing but to gamble public funds quite another, so the dealing room staff better pray for a divisional sell off and soon
Civil service have been paid a bonus, that’s taxpayer money well spent. How much revenue did they bring in ?
“gamble” ? Can people please not comment when they do not understand what they are talking about. Alot of what is done on the dealing floor is structuring derivatives so that Irish companies can reduce their currency and interest rate exposure. AIb Capital markets charge a fee (spread) for doing this and the risk neutralised on the international markets. It is very technical work. If this is not done in Dublin then these fees will be paid to banks in London and the revenue from this business will leave the country. Can I explain this in any simpler terms for all the simple people who like to comment about something they know nothing about ?
This reactionary politics will create long term damage to all business…… Allowing the government to influence employment contracts retrospectively is illegal and all other industries should take note ..!
Aib Capital Markets your crime was making money !!!! It made the rubbish in Bankcentre jealous….!!!
While the nation gets all upset about an 18m after tax payment to AIb Capital Markets the interest rate on the 3rd tranche of ECB funds comes with a “extra return interest spread” that will cost Ireland 5bn. This spread has never been imposed before. Ireland is the 1′st country to accept it. Our Govt did not argue to have it removed. Meanwhile we are all fighting over 18m after tax to AIB employees. Divide and conquer !!!!
“In Ireland politicians can now reach into business contracts and twist them to suit their political ends”. The bondholders in Aib are having their full rights as creditors, the IRISH STAFF are having theirs singled out to be overruled. THIS IS WRONG AND ILLEGAL and the message is loud and clear for the entire Irish Financial industry. Shame on you Brian lenihan for bringing our LEGAL SYSTEM into disrepute.
Billions to German gamblers (no problem), millions minus 52% Tax to Irish Employees “Galling”.
The Irish will always eat their own children….
I’d like to know where the senior Irish lawmakers are on the issue of differentiating between Irish Bank employees (creditors) and other creditors retrospectively ? Something is not right here.
John Foy is a hero to irish banking staff in this country for sticking up for his workers rights against the AIB Management, the government and the hostile public.
“The very arguements which the Minister for Finance is seeking to circumvent through the introduction of legislation in the case of AIB appear to be the same ones being used to support the payment of additional awards to staff in the Departmant of Finance and elsewhere”
Some €35.5 million was paid this year following legal action and a further €3.7
million was paid to staff in AIB Capital Markets in respect of deferred bonuses
relating to work in 2006 and 2007. Some 62 executives shared €11.11 million, or
an average of €179,000 each, for 2009, while 674 managers shared €30 million or
an average of €44,000 each.”
Meanwhile the staff that ACTUALLY made the profits get NOTHING… !!! Their parasite managers get PAID….!
Jillian . The above statement is not true. Nobody got paid.