The Department of Finance is to pay a consultancy firm €144,000 to advise on whether a €500,000 pay cap for the executives of bailed-out banks should be lifted.
It was announced in June that a “mini-competition” to select a consultancy would be held among the companies that are already on three panels which provide financial advice on the State’s bank investments.
However, it was subsequently decided that the contract to provide advice on the €500,000 pay cap would go to full tender, and would not be limited to the existing panels.
The department has now sought tenders for the contract and is poised to pay more than €144,000, plus Vat, to the successful consultancy firm to conduct a review of the current remuneration restrictions.
The closing date for tenders is September 7, and the review is scheduled to conclude within three months.
The process is expected to pave the way for the return of bank bonuses, a decade after the financial crash.
“During the financial crisis, the State provided €64bn in financial support, in various forms, to the banking system,” reads the tender document.
“In return, banks supported by the State agreed to a range of measures, including restrictions in relation to remuneration.
As well as the much-publicised €500,000 total compensation limit (excluding pension) and the prohibition of all bonuses (cash and shares), there are also a range of other restrictions in the letter that limit the banks’ freedom of action without the minister’s formal consent.
The department’s tender documents note that the pay cap applies to all staff at AIB, Bank of Ireland, and Permanent TSB, regardless of the country in which they are based.
This has affected the banks’ ability to use variable pay as a way of retaining key employees in the US, UK, and Europe, even in business lines “where this would be the norm in those markets”, it states.
In June, Bank of Ireland CEO, Francesca McDonagh, said that remuneration restrictions had curbed her ability to make senior appointments, since she took up the position in May, 2017.
In its IPO documents last year, AIB also warned that there were “elevated risks” associated with the pay-cap policy, especially as local banks were facing growing competition for talent from firms expanding in Dublin as a result of Brexit.
In the tender notice, the department refers to improved economic conditions and the banks’ return to profitability, stating that it is now “appropriate” to consider whether the current restrictions are still “fit for purpose”.