AIB chief to take pay cut as he admits bank mistakes

AIB’s chief executive is unlikely to look for a bonus or a pay rise for the rest of his career, after he admitted the bank has made mistakes.

Ireland’s largest bank, AIB is well placed to support its customers and any scandals at Anglo Irish Bank will not impact the group or Bank of Ireland, according to chief executive Eugene Sheehy.

“We are surprised and disappointed at what has been revealed,” Mr Sheehy said yesterday.

“None of us have been impressed at what has happened,” he added.

The bank chief also said there will be no bonuses or salary increases at AIB this year. As part of the Government’s recapitalisation plans, salary packages for senior executives at AIB and Bank of Ireland are to be cut by at least a third, bonuses scrapped and basic pay frozen until the end of the year.

Mr Sheehy admitted that bank pay in Ireland was out of control.

Based on his 2007 earnings Mr Sheehy’s pay will be cut by at least e1.3m while the new boss at Bank of Ireland, who will take over from Brian Goggin during the summer, will see the post’s salary slashed by e2.2m.

According to the Government’s plans, executive pay at the banks will be cut by at least 33% while non-executive directors on the boards of both banks will have their fees cut by at least 25%.

International markets would view AIB and Bank of Ireland as worthy investments due to their high standards of governance and their global presence, according to Mr Sheehy.

“We don’t believe that they will extrapolate at what’s happened in these incidents to us or to Bank of Ireland,” he said.

Mr Sheehy admitted the bank has made mistakes during the boom years adding that they probably failed to call the top of the property market in time.

“Clearly like most economies it is going to be tough for a couple of years, very tough,” Mr Sheehy said, adding that the country would be among the first to benefit from a recovery in the world economy.

AIB said the Government’s e3.5bn injection of preference shares will take it comfortably through the current economic storm.

Mr Sheehy said he was not heading for the exit and had the full support of the board. He said AIB, which was created in the Irish bank consolidation of the 1960s, was totally committed to its Polish unit Bank Zachodni WBK, brushing off speculation it may sell the unit.

“It’s an absolutely integral part of the bank,” he said.