Bank of Ireland may claim that its failure to report bonuses to the Department of Finance was simply due to human error and inadequate personnel records and that there was no intention to mislead.
But the Department of Finance clearly has a hard time buying that, and the public will have an even harder time still.
The truth is that, were it not for a leak to a journalist, this story may never have emerged at all.
The background to the bonus controversy is straightforward.
Last November, Fianna Fáil TD Chris Andrews (who lost his seat at the weekend) tabled a parliamentary question seeking information on the bonuses paid to bank staff since the Government rescued the institutions in September 2008.
In order to issue Mr Andrews with an answer, the Department of Finance went to the banks for the relevant information.
Bank of Ireland, in its response, stated that no performance-related bonuses had been paid “with respect to the financial years to March 2009 and December 2009”.
It added, however, that a “small number of people” at middle-management level “received payments which reflected either guarantees which were agreed on their joining the group or deferred payments where the historic performance criteria had been achieved and the payment was deferred over several years”.
So nothing major, or so it seemed.
But shortly before Christmas, a newspaper reported that one Bank of Ireland executive had been paid a substantial six-figure sum as a “guaranteed loyalty bonus”.
Finance Minister Brian Lenihan said he knew nothing about it, and ordered an investigation. Taoiseach Brian Cowen told the Dáil there would be “serious consequences” if “wrongdoing is found to have occurred”.
The bank quickly apologised, saying it had provided incorrect information to the department and promising to rectify the matter.
The report published yesterday outlines just how incorrect the bank’s original information was.
In short, it turns out that the bank paid €66.37 million in “bonus and quasi-bonus payments” to staff from September 2008 to December 2010 — a period in which it received billions of taxpayers’ money just to keep it afloat.
In addition, the bank has revealed that up to €21m more may be paid out this year between bonuses and commission payments.
Part of the bank’s excuse is that it sees a fundamental difference between bonuses awarded on a discretionary basis to reward good performance and bonuses which are built into contracts.
But law firm Arthur Cox, which is advising the Government, believes the bank used “a restrictive and uncommon interpretation of what constituted a performance bonus”.
To make matters worse, there are no guarantees that the bank has now provided the full picture. Yes, they have given “unequivocal assurances” on the matter. But consider the following passages from the report of the investigation:
“The computer systems or the manual systems from which the details were retrieved were not specifically examined by the department as this would have required more resources than are available.
“However, the bank has given assurances that it has retrieved the details of the additional payments in line with the undertakings it has given and that it has not concealed any payments from the department.
“The level of information provided suggests that there would be little point in the bank deliberately concealing other information although the catalogue of errors committed by the bank throughout this episode still gives cause for some residual risks.
“It is also relevant that information in relation to certain payments was leaked to a journalist and the bank would be taking a major risk in concealing other payments which could also be disclosed in this way.”
In other words, the department has no way of knowing for sure that the bank has provided fully accurate data. All it can hope for is that the bank is true to its word, that the computer and manual systems have proved effective, and that, if the bank considered pulling a fast one, it would recognise the threat posed by investigative media.
So to all intents and purposes, the department simply has to hope for the best. It does little to build confidence. The outgoing government has repeatedly been criticised for failing to get to grips with the banks. This report provides stark evidence of that failure — and offers much to ponder to the incoming administration.