Lenihan may use law to block bank bonuses

FINANCE Minister Brian Lenihan will use legislation if necessary to prevent executives of banks covered by the state guarantee from receiving bonuses in the immediate future.

As pressure grew on Irish Nationwide chief executive Michael Fingleton to hand back a €1 million bonus paid after the guarantee scheme was introduced, the Department of Finance confirmed that no more bonuses will be paid.

Irish Nationwide was one of the banks covered by the scheme which came into operation last September. Mr Fingleton received the bonus in November.

The Green Party called on Mr Fingleton to resign immediately and said he had shown contempt for all Irish citizens.

Finance spokesman Senator Dan Boyle said: “If an institution is benefiting from the guarantee scheme, I don’t think that can be guaranteed in itself if the institution is paying executives over above the odds and giving them packages that can’t be justified.”

A spokesperson for the Department of Finance said there is no intention to introduce an Obama-style tax of 90% on bonuses of banking executives in institutions covered by a guarantee.

But he said the Government is already adopting the recommendations of the recent Covered Institutions Remuneration Oversight Committee (Ciroc) report, that no bonuses should be paid in the immediate future. It has emerged that a potential successor for Mr Fingleton, who is expected to retire this year, has decided not to take over the role following the publication of the Ciroc report which recommended that the head of Irish Nationwide should be paid no more than €360,000 a year.

The department spokesperson said the minister “will bring in legislation, if necessary, to force the banks to bring in these recommendations”.

Mr Lenihan will meet the board of the building society later this week.

It is expected he will also raise reports that Mr Fingleton was the sole beneficiary of a €27.6m settlement by the society of a defined benefit pension last year.

Fine Gael spokesperson on finance Richard Bruton said the bonus was outrageous: “At a time when financial institutions have had to turn to the state for support and at a time when serious errors have been made in the running of financial institutions that have jeopardised the whole economy, the notion that huge payments are paid out to those executives who have been involved is an affront to people,” he said.