Governor ‘would approve’ big salaries for bank chiefs

THE governor of the Central Bank, Patrick Honohan, has indicated he is willing to approve high salaries for bank bosses, putting him on a collision course with Finance Minister Brian Lenihan.

Last night, Mr Honohan told the Financial Services Ireland annual dinner in Dublin that he is willing to condone the payment of big pay packets “in some instances” for those filling key financial positions in Ireland.

“It is because, when it comes to certain key individuals with hard-to-find experience, skills and reputation, we have to be realistic price-takers and acknowledge the opportunities these individuals have in a competitive world market which still rewards these attributes very well.”

The governor acknowledged that the indications are that periods of exceptionally high pay in finance worldwide have been periods of excessive risk-taking and eventual crashes.

“So it doesn’t really do to dismiss the issue of remuneration as something that doesn’t matter ‘in the large scheme of things’; it really does matter. Paying bonuses on the basis of apparent short-term profit is a particularly harmful practice that operates against the long-term interests of the firm as well as of society,” he explained.

“Such practices are legitimately subjects for regulation and we are in the process of implementing the commission’s April 2009 recommendation on remuneration policies.”

Mr Honohan went on to point the finger directly the banks’ own directors and management for many of the problems that has brought the Irish banking sector to its knees.

“There do appear to have been fairly basic violations of good governance practices (to say the least) in some institutions. Ongoing investigations into possible wrongdoing are being vigorously pursued both by the Financial Regulator and other authorities.”