Finance Minister Paschal Donohoe has defended the Government’s controversial decision to remove the €500,000 salary caps for some bankers as well as reinstating bonuses of up to €20,000.
Tempers flared in the Dáíl over the decision on Tuesday afternoon, as Sinn Féin leader Mary Lou McDonald branded the move “twisted” while “workers and families endure an unprecedented cost-of-living crisis”.
It also comes following a number of interest rate hikes announced by the European Central Bank that will directly affect Irish customers.
Minister Donohoe, alongside Minister of State Sean Fleming, published the Retail Banking Review on Tuesday afternoon.
Two of the more controversial recommendations of the review included permitting bonuses of up to €20,000 per year for employees in AIB Bank of Ireland and Permanent TSB (PTSB).
In the case of Bank of Ireland employees, it was recommended that the maximum pay cap of €500,000 for an individual should be removed.
Both of these recommendations were accepted by the Government.
These measures were put in place following the financial crash that saw the Government bail out the banks to the tune of €45.7bn.
The Irish Mirror asked Minister Donohoe if he agreed that the optics of removing these rules looked bad during a cost of living crisis and when homelessness numbers are at record high looked bad.
The Fine Gael TD said that while he accepted that the decision would be difficult for some to accept, it was done to secure the stability of banking.
“For so many who have had to contend with the consequences of our banks in the past, for many who are struggling with and dealing with the consequences of inflation and the higher cost of living that this is a difficult argument to make,” Mr Donohoe said.
“I’ve explicitly acknowledged that.
“The three banks that this strategy is focusing on are now in the aftermath of two banks leaving Ireland entirely. That has created serious issues that we need to consider.
“We are now in an economy in which we have large international banks present here in Ireland that are not subject to these pay caps.
“What I am very concerned about is that in the time ahead, our banks will not be in a position to have the right people working in them to perform functions that are really important for the functioning of those banks and for their growth and their stability.”
Mr Donohoe said that many of those working in IT and governance earn salaries of less than €50,000 a year and that if the rules around salaries were not changed, these people would be enticed to work in other sectors that can offer bonuses and higher salaries.
He also said that despite job losses in KBC and Ulster Bank, recruitment targets for AIB, Bank of Ireland and PTSB are not being met. He stated that one third of people who leave banking jobs say that they are leaving due to pay-related issues. Between 40 and 45% of these people move to employers who do pay bonuses.
Minister Donohoe also said that the €500,000 pay cap in Bank of Ireland could be removed as the State was no longer has shares in the bank,
The Government still has shares in AIB and PTSB and this is why the pay cap will still apply until these shares are sold.
However, Minister Donohoe declined to say when this might be.
There was fury in the Dáíl over the decision, with Taoiseach Micheál Martin forced to defend the decision during a testy debate with Mary Lou McDonald.
Ms McDonald said that these rules were put in place following the financial crisis that “meant austerity and the most vicious of cuts” for many people in society.
Mr Martin said that there were 20,000 people working in retail banks and that this could result in bonuses for these employees.
“Why is the Opposition, including Sinn Féin, against ordinary workers in the banking sector from getting a pay rise?” he said.
“If anybody is trying to kick the teeth of anybody, she is kicking the teeth of the ordinary bank workers of this country.”
Other measures adopted following the Banking Review include the drafting of legislation to “require the protection of reasonable access to cash”.
“It also recommends the preparation of a new national payment strategy to ensure future changes are fair, or equitable, transparent and, most importantly of all, that they are thought through” Minister Donohoe added.
It comes following fury in July when AIB announced that they would no longer provide cash services in 70 branches. They were later forced to reverse the decision.
New legislation will be put in place to allow Credit Unions to grow, with the goal of allowing more facilities to offer current accounts and mortgages.
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