Government to remove cap on bankers' pay

Maximum €500,000 salary cap for bank CEOs will be removed

It follows the decision by Minister for Finance Paschal Donohoe to sell the remaining State stake in AIB.

Finance Minister Paschal Donohoe has announced that the cap on banker’s pay at AIB and PTSB, which limited salaries to a maximum of €500,000 a year, will be removed to allow them to compete better for talent.

The cap was initially put in place in the wake of the financial crisis and the bailout of the three banks AIB, PTSB, and Bank of Ireland. The chief executives of these banks saw their salaries capped with bonuses above €20,000 attracting a super-tax of 87%.

The cap on pay had already been removed from Bank of Ireland as the Government exited its share position in the company in September 2022.

The decision to remove the cap on the two remaining banks comes as a result of the Government selling its remaining stake in AIB, however, the State retains a 57% stake in PTSB which is valued at around €600m.

Speaking to the media on Tuesday, Mr Donohoe said the “skillset required in the banking sector is evolving” and these skills are in demand across numerous sectors.

“So the banks are competing for this talent against other companies who are more flexible and have different remuneration policies,” he said.

Mr Donohoe said he does not believe it is correct for the Government to set the pay of a company that it no longer has a share in, referring to AIB, and that it would also not be fair to PTSB to have to compete with the other two banks while having the restriction in place.

“I would hope that banks like AIB and Bank of Ireland will continue to be able to attract investment in their future. For that reason, us playing a role in setting their pay when we no longer own a single share in those companies is not appropriate,” he said.

"Removing the salary cap for PTSB at this juncture is to ensure that it is not put at a competitive disadvantage against the other pillar banks.” 

Mr Donohoe said that they have no plans at present to change the restrictions on bonuses for bankers.

He added that he understands the sensitivity of this decision amongst members of the public but he said there have been “huge changes” in relation to how banks are regulated in Ireland and it is better to “deal with the issues of performance through regulation, as opposed to pay”.

On the State’s outstanding share in PTSB, Mr Donohoe said it will be kept under review but setting a deadline for disposal of its shareholding is “not in the interest of either the taxpayer or PTSB”.

“I believe it has a very positive future. We are seeing clear signs of the progress that it has made in expanding its lending and the progress that it is now making in the mortgage market here in Ireland,” he said.

In the wake of the financial crash, a total of €29.4bn of taxpayers' money was invested in AIB, Bank of Ireland and PTSB between 2009 and 2011. To date, approximately €29.4bn has been recovered with the value of PTSB shares still outstanding.

The final sale of State shares in AIB, a 2.06% stake, was completed at a price of €6.94 a share generating €305.3m for the Exchequer. This means €19.8bn has been returned to the State to date from its investment in AIB.

AIB chief executive Colin Hunt said the bank “profoundly regrets” that it needed to be rescued by the State and “owes an immense debt of gratitude to Irish taxpayers”.