AIB AND Bank of Ireland, the largest financial institutions in the State, have curtailed the recruitment of new staff in light of cuts in their profit forecasts due to the economic downturn and the sustained decline of the property market.

Neither bank has introduced an outright ban on recruitment, but both have sought means of reducing any requirement to hire new workers or make external appointments to replace outgoing staff. This effort to control staff costs comes after sharp cuts in the share price of both banks and an increase in the cost of funds on the international money markets

"There's no recruitment freeze. However, we review our recruitment requirements regularly and where we require employees for job roles within the group we continue to recruit as we have a need for additional staff," said an AIB spokesman.

Last month AIB reported a 4 per cent drop in pretax profits to €2.5 billion for 2007. The bank predicted "low single-digit growth" in adjusted basic earnings per share for 2008, down from a 13 per cent rise last year.

In that context, AIB is redeploying staff if vacancies arise and if there is scope to reduce staffing levels in another area of its operations. This represents an effort to maximise use of internal resources instead of going outside the bank for appointees.

In addition, AIB wrote within the past fortnight to every "successful" candidate for its graduate recruitment programme this year saying that it was "not in a position to make any job offers at this point in time".

AIB told the candidates in question that the bank appreciated the time and effort they put into the selection process and wished them every success in the future. "Your application will be reviewed over the coming months and should a suitable position arise we will be in contact with you."

AIB's spokesman said it was not the case that it had suspended entries to the programme or suspended the programme at large, which is considered to be a prime source of new blood for the bank.

He declined to quantify the number of programme entrants each year but acknowledged that each successful candidate this year has been told there is no vacancy.

The purpose of letters sent to these candidates was to inform them that a review was underway. AIB wants to avoid a situation in which they rejected any other job offer because they were waiting to hear back from it, he said.

Similarly, Bank of Ireland is understood to be reviewing the need to recruit any external candidates for jobs on a case-by-case basis. "We are not operating a total ban on recruitment as we invest appropriately to grow our business. In the current environment we are reviewing all vacancies to ensure we only incur costs that benefit the customer and are business critical," said a Bank of Ireland spokesman.

The bank is currently forecasting 3-5 per cent growth in earnings per share for the fiscal year ending this month. It forecast "high single digit" growth as recently as November.