Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

The primary focus of the issues raised by the Deputies appears to be the voting intentions of the Minister for Finance, as a 15% shareholder on behalf of the State, on resolutions concerning remuneration and election of directors at the impending annual general court of the Bank of Ireland, which is to be held tomorrow, 24 April. In that regard, it might be helpful and useful if I outline the operational relationship that exists with the bank and the general policy on remuneration at the covered institutions before dealing with some of the more specific points that have been raised by colleagues.

The relationship framework provides that the State will not intervene in the day-to-day operations of the banks or their management decisions. These frameworks, which are bank-specific, are published on the website of the Department of Finance, having been agreed with our international partners, the troika. They recognise that the covered institutions remain separate economic units with independent powers of decision and that the boards and management teams retain the responsibility and authority to determine their institutions' strategies and commercial policies and conduct their day-to-day operations.

The current policy on remuneration at the covered institutions dictates that no individual may receive annual aggregate remuneration, excluding pension contributions, exceeding €500,000 unless specifically authorised. This overarching policy is now supplemented by the inescapable conclusion, arising out of the recently published review of remuneration practices and frameworks at the covered institutions conducted by Mercer, that as the remaining institutions still incur losses, their respective cost bases need to be reduced further. This is essential if they are to return to profitability and be in a position to support the economy and repay the State's investment through a return to private ownership.

On behalf of the Government, the Minister for Finance has directed the banks to come up with plans for how they intend to address this issue in a manner that can help meet the State's objectives. I expect the value of those plans to mean a saving of somewhere between 6% and 10% of total remuneration costs, through reductions in payroll and pension benefits, new working arrangements and structures that deliver efficiency gains.

The Minister has not directed the specific measures that each bank should take, respecting their differing paths to profitability and the relationship with the State as explained above. I expect to receive an outline of each bank's strategy by the end of April. However, I expect that any measures proposed will require sacrifices at all employee levels and strong leadership to be exercised by the banks in delivering in a timely manner. The stakes for all are high.

I readily acknowledge the sacrifices and changes made by bank employees to date at all levels and recognise that this has been achieved without major industrial unrest in what is a critically important sector of the economy. However, it can never be forgotten by the management and employees of these banks, both past and present, that without enormous cost to Irish taxpayers these institutions would not have survived. This needs to be borne in mind during future discussions. It was in this context that the Minister decided to abstain on the resolution to consider the report on directors' remuneration. In regard to the other resolutions, I can confirm that the Minister has voted in favour of each of them, one of which relates to the election and re-election of the bank's directors.

In regard to some of the more specific points raised by the Deputies, I can confirm that the bank is in compliance with the existing policy on remuneration. As I mentioned, the current policy and previous iterations of it allowed for exemptions. It was under this parameter that the previous Government authorised a salary for the present CEO of the bank in excess of the then salary cap of €500,000. I am reluctant to discuss the remuneration details of an individual on the floor of the House. However, such details are well known, having been published in annual reports of the bank over the last number of years.

The Deputies will appreciate that this was the position the Minister for Finance faced on this particular issue.

The strong legal advice available to this and previous Governments is that pre-existing contractual commitments have to be honoured. In the case of the new CEO appointments at AIB and Permanent TSB, respectively, the Minister ensured the policy on remuneration was observed and it continues to be held.

See this speech in context