IE
If you work for an Irish bank, you’re probably not the sort of person who puts a deposit on a speed boat in anticipation of an annual bumper bonus payout – particularly over the last two years.
Nevertheless, this week’s European Union bonus rules provide a further reason for Ireland’s large banks to hold back on variable compensation.
The precise wording of the EU’s document is as follows:
In the case of credit institutions that benefit from exceptional government intervention:
(i) variable remuneration is strictly limited as a percentage of net revenues when it is inconsistent with the maintenance of a sound capital base and timely exit from government support,
(ii) the relevant competent authorities shall require credit institutions to restructure compensation in a manner aligned with sound risk management and long-term growth, including inter alia and when appropriate establishing limits to the remuneration of Directors.
(iii) no variable remuneration should be paid to the directors of that institution unless this is justified.
With Bank of Ireland, AIB, Anglo Irish, and Irish Nationwide all tapping the state coffers, this means that while they will be free to pay bonuses, it means they won’t be free to pay that much.
“I’d read this as saying that the total bonus pool should be capped as percentage of net revenues, with member states allowed to decide the appropriate level,” says Jon Terry, head of reward at PWC. “If that’s going to be consistent with repaying government money, you’d think the percentage needs to be lower than other banks, and maybe even lower that it is currently.”
Currently, this is a moot point anyway, with Irish banks all determining to cancel bonus payments (and freeze pay) in a bid to clamp down on costs.
However, this also means that for as long as they remain in state shackles, bonuses for Irish banking staff are going to remain subdued at the very best.
