Govt charges banks €1bn

The Government is to recoup €1bn from eleven banks protected under a two-year State guarantee scheme.

Up to two executives approved by the Finance Minister Brian Lenihan will also be placed on the boards of the financial institutions.

The Government tonight published new details of the €400bn scheme which has been approved by the EU Commission and will be debated in the Dail tomorrow.

The €1bn charge represents about 10% of the combined annual profits of the eleven banks.

Under the scheme, the pay and bonuses of banking chiefs will be overseen by a three-person independent committee appointed by the minister.

The Covered Institution Remuneration Oversight Committee (CIROC) will have the power to examine the salary details of all directors and executives.

“Bonuses will be measurably linked to reductions in guarantee charges, reduction in excessive risk taking and encouraging the long-term sustainability of the covered institution,” the legislation stated.

The Government’s scheme, which was hastily announced amid international banking turmoil on September 30, covered all deposits and borrowings in Irish-owned institutions: Allied Irish Bank, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent and permanent tsb, Irish Nationwide Building Society and the Educational Building Society.

Foreign-owned banks later added to the scheme included Ulster Bank, First Active, Halifax Bank of Scotland, IIB Bank and Postbank.

The finance minister will review the functioning of the scheme at six-month intervals. It will also be monitored closely by the Financial Regulator and the Central Bank.

The protection will promote “the highest standards of corporate and social responsibility in the banking system,” the legislation stated.

The draft laws, entitled the Credit Institutions (Financial Support) Scheme 2008, could be signed into law within days.