AIB AND Bank of Ireland have rejected any suggestion they should remove their respective chief executives, Eugene Sheehy and Brian Goggin, in light of their decision to accept €2 billion each in new capital from the State after drastic cuts in their share prices.
Although senior Government sources said in advance of the recapitalisation agreement that Minister for Finance Brian Lenihan wanted management changes in the big banks in return for State capital, the deal struck on Sunday does not require any immediate change.
The banks' defence of their most senior executives came as Mr Lenihan said yesterday that the boards of both institutions will have to reflect on the performance of their management teams when they each seek to raise an additional €1 billion to strengthen their capital position.
"He has the full support of the board and there is no question over his position," said AIB's chief spokeswoman when asked if Mr Sheehy's position was under review.
"No changes are planned," said Bank of Ireland's spokesman in respect of Mr Goggin's position.
Mr Lenihan rejected suggestions the State should have sought greater management restructuring in both Bank of Ireland and AIB in return for its investment and pointed out that the State would end up with 25 per cent of shares in both banks and four directors on each board.
"The banks have said themselves that they will raise an additional €1 billion of risk capital so it's up to management to prove themselves in the rights issue exercise. And I've no doubt the boards will reflect on that," he said.
"Both Bank of Ireland and Allied Irish Banks have boards that will have to reflect on the performance of their own management teams and, of course, they will reflect on them, but it is not the function of the Government to chop off heads every second of the day."
Mr Sheehy and Mr Goggin indicated in telephone presentations to investment analysts that they will approach their own shareholders first when seeking to raise the additional capital required under the Government scheme.
The Government will provide an additional sum of up to €1 billion to each bank if they cannot raise the money from private investors.
AIB shares, down 88 per cent in the past year, closed 1.21 per cent stronger last night at €1.67 after rising to more than €2.09 earlier in the day. Bank of Ireland, down almost 91 per cent in 12 months, gained 31.85 per cent to close last night at 89 cent and reached 98 cent earlier. Anglo's shares, down 97 per cent in one year, lost more than 14 per cent to close at 30 cent and fell below 24 at one point.
Traders in the Dublin market, citing the Government's control of 75 per cent of the voting rights on Anglo's board, said the markets now believe Anglo may end up as a State-controlled vehicle to manage the worst-impaired loans in the Irish banking system.
It has emerged that the Government increased the size of its planned investment in Anglo by half in the final hours of talks. Mr Lenihan was offering €1 billion up to lunchtime on Sunday but raised the offer to €1.5 billion in the face of tough negotiation by the bank.
Anglo has initiated the process of appointing a successor to David Drumm, who resigned as chief executive following the resignation of former bank chairman Seán FitzPatrick over the bank's concealment of €87 million in directors' loans he received.
Mr Lenihan has said the future of the chief executive of the Financial Regulator, Pat Neary, was a matter for the board of the Irish Financial Services Regulatory Authority.
The authority has initiated an inquiry into its response to its discovery of Mr FitzPatrick's loans, which it became aware of last January.
