Ireland

AIB seeks scrapping of €500,000 pay cap as bank talks with Minister for Finance

Review likely to re-examine top pay now that State shareholding is below 40%

The State’s shareholding in AIB is now a little below 40% for the first time since the institution was nationalised at the height of the financial crisis. Photograph: Dara Mac Dónaill

Arthur Beesley
Tue Mar 5 2024 - 06:00

The Government is discussing with Allied Irish Banks (AIB) the framework for a ministerial review of the €500,000 pay cap in the lender as it presses for the crisis-era measure to be scrapped.

The development comes after Minister for Finance Michael McGrath sent a “confidential” letter last Friday to AIB chairman Jim Pettigrew, six months after he sought an “urgent meeting” with the Minister on top pay.

Any review is likely to re-examine top pay in the bank in the light of the decline in the State’s AIB shareholding, now a little below 40 per cent for the first time since the institution was nationalised at the height of the financial crisis.

With private shareholders again in a majority position in AIB the review is also likely to take into account the impact over time of a Government share-trading plan to continue reducing its stake. The current trading plan, initiated in January, remains in place until July.

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When Mr McGrath met Mr Pettigrew in November the Minister said the pay cap was under consideration and “will be reviewed at the appropriate time”.

Although the framework for such a review is considered unlikely to be finalised before AIB issues its 2023 financial results on Wednesday morning, close observers believe the lender will provide an update on the pay issue at that time.

The talks come five years to the week after chief executive Colin Hunt took control of the bank.

There was no comment on the discussions from AIB, Ireland’s largest lender by market capitalisation, and the Department of Finance was silent on the Minister’s stance.

“A letter did issue, but as to its contents they are confidential,” the department said in response to questions.

Mr Pettigrew has argued in private correspondence with the Minister that the AIB board and private investors see the cap as a “material talent retention risk” that puts that bank at a “significant disadvantage” to competitors.

With the Government no longer in a majority position, the chairman has argued that restrictive pay measures imposed in 2009 are untenable.

But with local and European elections looming in the summer and a general election to be held within the next year, bank pay is politically sensitive for the Minister. Any move to ease the cap could expose the Government to Opposition attack from parties who argue the restrictions should be retained because of the legacy of crisis.

Arthur Beesley

Arthur Beesley

Arthur Beesley is Current Affairs Editor of The Irish Times

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