ALLIED IRISH Banks (AIB) notified the Department of Finance informally late last week about the bank’s intentions on the proposed salary for the new managing director, Colm Doherty.

The bank made contact with the department last Friday to say that it intended to submit a proposal relating to what it planned to pay Mr Doherty in his promoted role.

The department may also have received a broad outline of the bank’s intention to retain Mr Doherty on his existing pay level as head of the capital markets unit. He was paid an annual salary of €633,000 in that role.

However, the official in the department who was in contact with the bank made no response to AIB’s proposal at the time, nor did he inform the Minister, as he intended to wait for the bank to submit a proposal.

A spokesman for the department declined to comment. A spokeswoman for the bank had no comment to make.

On Tuesday, the Government rejected a proposal from the bank that it retain Mr Doherty on his existing salary, which was in excess of the €500,000 cap.

Minister for Finance Brian Lenihan said that the Government was unwilling to breach the salary guideline in this instance.

Mr Doherty was appointed group managing director of AIB the following day on an annual salary of €500,000.

Mr Lenihan told RTÉ Radio this week that AIB submitted a salary request in a communication with the department at 7pm on Monday and that he was informed of the request later that evening.

The new governor of the Central Bank, Dr Patrick Honohan, said banks risked losing out on the best candidates if they could not offer competitive pay packages.

“Around the world, people are becoming less keen on absolute ceilings on earnings. If you do that, you can end up losing the people you want to keep,” he said in an interview published yesterday, but conducted before this week’s controversy over the pay issue at AIB.