The Department of Finance has said Minister Paschal Donohoe recognises that restrictions on pay create recruitment and retention problems for banks, but that there are currently no plans for a change in policy.
Chairman of Bank of Ireland Patrick Kennedy met Mr Donohoe in June to express concerns over the cap on bankers’ pay.
According to documents released to RTÉ News under Freedom of Information, the purpose of the meeting was to “update the minister and the department on the various challenges encountered by the bank in terms of attracting and retaining staff (especially senior management and certain specialist recruitment areas) in light of the remuneration restrictions”.
Minutes of the meeting state that “the minister outlined his thinking on the remuneration restrictions”.
The minutes also show that other topics covered included an update on the search for a new Group CEO at Bank of Ireland and a discussion about the current phase of the Government’s trading plan, which is designed to reduce the State’s shareholding in the bank to zero.
In May, the chairman told the bank’s annual general meeting that restrictions on remuneration, which apply to it and other banks here, should be replaced by European Banking Authority guidelines on pay.
Mr Kennedy said the pay cap and ban on variable pay are not replicated in any market in which the bank does business.
“They create an uneven playing field between the bank and other corporates, both banking corporates and non-banking corporates, with whom we compete for talent,” Mr Kennedy said.
Bank of Ireland is continuing its search for a new CEO after Francesca McDonagh, whose salary was capped at around €1m, left for a role at Credit Suisse earlier this year.
Other senior executives have also left the bank in recent times to take up roles at companies where no pay caps apply.
The banking industry has been arguing for some time that a €500,000 pay cap and a ban on bonuses has made it difficult to attract and retain talent.
The issue is expected to be assessed in a review of banking policy which is currently being undertaken by the Department of Finance.
In a statement today, the department said there are currently no plans to change policy in the area of bank pay.
“Government policy on banking remuneration has remained unchanged since the financial crisis, which is over a decade ago,” the department said.
“Extensive restrictions are in place and these affect around 20,000 workers across the three Irish banks, from the most junior staff to the most senior ranks as variable pay, including bonuses and many other benefits, cannot be paid.”
“The minister recognises that these restrictions create recruitment and retention problems for the three organisations,” the department added.
In the UK, a plan to remove a cap on bankers’ bonuses was one of the measures contained in the controversial mini-budget announced by Liz Truss and Kwasi Kwarteng.
While most of the proposals have been reversed by new Chancellor of the Exchequer Jeremy Hunt, the plan to lift the cap on bonuses is expected to go ahead.