Central Bank claims flexibility on bankers' pay, including removal of €500k cap, has merits

Central Bank claims flexibility on bankers' pay, including removal of €500k cap, has merits
Professor Philip Lane.

A proposal by the former governor of the Central Bank to return bankers' bonuses has been slammed.

In a letter to the Finance Minister Paschal Donohoe, Philip Lane gave his support to an end to the €500,000 cap on bankers' bonuses, saying the cap currently may limit the pool of people from which Ireland's banks can recruit for senior roles.

However, member of the Public Accounts Committee and Fianna Fáil TD, Marc MacSharry, said ordinary banking staff will not benefit from this proposal.

Mr McSharry said: "It is about the beginnings, yet again, of a culture that helped along, with many other issues, to put the ship of the Irish nation on the reef.

"We should resist that at all costs and further we should begin to look at the reintroduction of corporation tax for these profitable banks which last year alone would have lead to an addition €230m in taxation for the Exchequer."

However, in his letter which was requested by the Finance Minister, Professor Lane said pay was not the only factor that motivated people to apply for the roles, illustrating his pointed with recent recruitment rounds.

The outgoing governor said there was a great risk that affected banks, mainly AIB and Permanent TSB, would not get the best talent for critical roles below the executive level as they were competing for talent not just with other banks, but also with professional services and technology firms.

Prof. Lane wrote: "There is a risk of losing staff in critical functions or with specialist skills in areas of IT, risk, compliance, and related functions to firms that are not subject to remuneration restrictions."

He concluded by saying that in the regulator's view, more flexibility around remuneration was not, in itself, the solution to the banks' challenges and he advocated doing more to build pipelines of talent including more diversity in the banking system, particularly at senior levels.

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