Paul Murphy (Dublin South West, Solidarity)
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96. To ask the Minister for Finance the consultations being held with trade unions in the banking sector on the banking remuneration review; his views on the need for a distinction between the pay of senior management and low and middle income bank staff; and if he will make a statement on the matter. [30980/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy will be aware Government policy on banking remuneration has remained unchanged since the financial crisis. The State's banking remuneration restrictions date back to the State’s 2009 preference share investments and these were replicated and extended in the 2011 "Minister's letter".

These restrictions apply to all staff at all ranks impacting c. 23,000 workers across the three banks in which the State has a shareholding. These restrictions also apply to all staff of the banks regardless of the country in which they work and as such the bank cannot use variable pay as a retention mechanism in the UK, US and Europe even in business lines where this would be the norm.

The restrictions not only limit total remuneration for staff in AIB, Bank of Ireland and PTSB to €500,000 (excluding a standard pension contribution). They also dictate that bonuses (including those paid in shares) and many other benefits cannot be paid to any staff members. These include no new fringe benefits, no new commission or incentive schemes and restrictions over contractual arrangements with staff on termination that provide compensation.

As you will know I voted against a remuneration resolution at the AIB AGM in April and abstained from a resolution at the Bank of Ireland AGM. I did this because I have been very clear that any changes in relation to restrictions on compensation for the banking sector will have to be led by the Government.

However I do recognise that the overall economic circumstances have changed markedly since these restrictions were introduced and that an un-level playing field currently exists in the market as no such pay restrictions apply in the case of any other banks, financial institutions or non financial companies operating in Ireland. This puts the three banks in which the taxpayer is the largest shareholder at a competitive disadvantage.

As you know I have initiated a review of our bank remuneration policy to advise on whether it remains fit for purpose, identify its impacts and update me on how this policy compares in a wider European context. My Department is in the process of a procurement exercise in order to engage a professional consultancy firm to advise and assist in the review.

I do not want to pre-empt this review by prescribing or predicting what the outcomes will be but I will note that included in the terms of reference is a planned review of general compensation arrangements across junior and middle ranks in the retail and commercial banking sector in Ireland and whether this presents issues for the banks involved. This part of the review will focus on the structure and composition of their compensation (i.e. absence of any variable pay) rather than their absolute quantum of compensation, given that at these levels within the banks the €500,000 salary cap is not relevant and compensation is determined by market considerations.