But the regulator’s call was shot down by Junior Finance Minister Brian Hayes last night, who insisted that bankers should be able to do their jobs within current pay limits.
Mr Elderfield said financial institutions were having trouble recruiting new management because of a government imposed restriction on pay limits.
With troubled institutions now refinanced and an overhaul of the sector under way, Mr Elderfield said there was a need now to make sure that the best bankers took charge of state-funded banks.
Speaking in Donegal at the MacGill summer school, he said: “Apart from Bank of Ireland, Irish taxpayers are probably going to own all the banks. Refresh and bring in some fresh talent. I think it’s important to bring in some outsiders into the management. We want to get our best value out of them. Not having any barriers to that I think is something important.”
Following the Covered Institutions Remuneration Oversight Committee (CIROC) review of bank pay in early 2009, the Government set the €500,000 pay limit for chief executives, except in exceptional circumstances.
Bailed-out Allied Irish Bank has already called for the salary ceiling to be abolished for its new boss, to replace managing director Colm Doherty who received some €2.7 million for his salary, pension and a termination agreement.
Mr Elderfield said: “Looking at the remuneration structures for the banks is going to be important. So I think it makes sense to look afresh at this issue, look at the CIROC standards that are there and see where they need to get changed... I think it’s already becoming an issue for some of the banks.
“It’s better to have an arms length between the political system and the banking system and to look at the renumeration arrangements that are around, make sure there are the proper incentives, there is no risk taking and they can also bring in some outside help.”
However, Mr Hayes said: “I don’t agree with it [cap removal]. Our banking system is still in the A&E ward, we’re not in normal territory and we all must recognise we’re in this mess in part because of the failure of regulation, the failure on the part of the Central Bank and equally a failure on the part of our banking system. And the idea that people would go back to the normal habit of paying themselves excessive bonuses is simply anathema to the government and something we would oppose.
Mr Hayes said he wanted to see this new banking talent before any decision was made on removing the cap.
“I’d love to see that great guy and see the colour of his money and the colour of his eyes before I made that decision, because the money that is there currently in pay and remuneration is very healthy in relation to any banking system, and quite frankly I don’t buy it. I don’t buy this idea that we don’t have people who are prepared to work for the kind of money that’s on offer. Goodness knows if you look at the kind of money that was handed out in better times and the mess that was made by these top executives, they’ve fallen a long way.”
The Financial Regulator conceded: “People are very angry and concerned but we’re at this turning point where the EU deal has occurred, there’s some outside investment. It’s now getting clearer, with the stress tests and the amount of capital going in, about the financial position of the banks.”
He also said that following the recapitalisation of banks, they should be more flexible dealing with mortgage owners and businesses in arrears.