Enda Kenny says bank pay caps are a constraint

Taoiseach Enda Kenny said Government-imposed banker pay caps are a “constraint” as the chief executive officer of state-owned AIB prepares to leave for a job in the UK.

Enda Kenny says bank pay caps are a constraint

David Duffy said this week that he is resigning from AIB, based in Dublin, to take over as chief executive of National Australia Bank Ltd’s Glasgow-based Clydesdale Bank.

“Wage caps are a constraint and obviously coming from where we’ve come from, that’s been a difficulty,” Mr Kenny said in an interview at the World Economic Forum in Davos.

“David Duffy proved his mettle.”

In 2013, Mr Duffy’s remuneration was €489,000, below a €500,000 pay cap for chief executives of rescued Irish banks. David Thorburn, his predecessor at Clydesdale, was paid about £1m (€1.32m) in the year through September 2014, according to the company’s annual report.

Mr Kenny declined to say if the Government would relax the pay cap in seeking a replacement for Mr Duffy.

Last year, Finance Minister Michael Noonan ruled out paying bonuses at AIB, which needed a €21bn bailout after the property market implosion.

The Government last week picked Goldman Sachs Group Inc to advise on how to recoup the cash injected into the bank.

Mr Kenny also said he did not expect any adverse findings from the EU investigation in Apple’s tax affairs in Ireland.

“Ireland is now one of all of the countries that are being examined here,” said Mr Kenny. “We’ve made a very strong submission that there were no state aid rules involved in the case; there are no breach of state aid rules involved in the case of Ireland and Apple’s case.

“Ireland has been very upfront about this. We will fight hard, but we will fight fair. We have ended the ‘double Irish’. We have ended the stateless concept.

“We are fully co-operative with the best process in the OECD. And we want to see an international response to this particular phenomenon. All of the countries in Europe are now being examined. In Ireland’s case, it’s Apple. We believe very strongly that the case we have made and the actions taken by Ireland over the years do not constitute a breach of state aid rules and we will contest that and fight it very vigorously beyond a decision of the Commission, if that were so.”

Mr Kenny said he backed the Department of Finance’s position on the Central Bank’s proposed 20% mortgage deposit rule, adding that he did not want future home loans restricted to “wealthy people and the children of wealthy people”.

“The Department of Finance, on behalf of the Government, have made a very clear submission to the Irish central bank, because you don’t want a situation that might evolve, depending on the decision they make, where the result would be beneficial to wealthy people and the children of wealthy people,” Mr Kenny told Bloomberg TV at Davos.

“In Ireland, it’s very important that people have an aspiration and a hope to own their own homes. And therefore, for younger couples and for people coming into the labour market and the property market, they need to have a demonstration that they can actually achieve their aspiration of buying their own home.”

The Central Bank will unveil next week its macro prudential tools aimed at preventing a new housing bubble.

The Department of Finance has raised concerns that a 20% deposit requirement would exclude first-time buyers from lower-income backgrounds. It proposes that an exemption is made for first-time buyers.

“Well, let’s wait and see what the bank will do,” said Mr Kenny. “Governor Honohan and I have spoken about this, but as I say I support strongly the submission made by the Department of Finance in respect of having that aspiration be proven, that people can get on the property market and aspire to own their own homes without undue difficulty. At the same time, you don’t want to go back to a position where you had indiscriminate lending, which was in part a contributing factor to the collapse of the construction sector entirely.”


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