The British Government is in talks with Allied Irish Banks (AIB) regarding a potential review of the long-standing €500,000 pay limit as part of its push to dismiss financial crisis-era restrictions. The dialogue has been initiated after Michael McGrath, the finance minister, confidentially communicated with AIB’s chairman, Jim Pettigrew, six months after a request for an urgent discussion on senior salaries.
Given the diminishing shareholding of the state in AIB, which is now just under 40% for the first time since nationalisation during the financial crisis, it is expected that the review will revisit top tier salaries. The review is also anticipated to consider the long-term effects of the ongoing Government plan to decrease its shareholding, with the current trading plan set to be in effect until the summer.
Although it’s unlikely that the framework for this review will be finalised by the time AIB announce its financial results for 2023, industry insiders anticipate some form of update on the salary issue.
The discussions coincide with the fifth anniversary of Colin Hunt’s appointment as CEO of the bank. Neither AIB nor the Department of Finance have offered comment on the discussions, with the latter stating the letter did exist, albeit the contents were confidential.
According to confidential correspondences, Pettigrew has claimed that the pay limit is viewed by the AIB board and stakeholders as a significant threat to talent retention, putting the bank at a disadvantage to its competitors. With the Government no longer holding a majority share, Pettigrew argues the salary restrictions imposed in 2009 are no longer viable.
Despite this, McGrath could face political backlash should the cap be relaxed amidst upcoming local and European elections, as well as a general election next year. Opposition parties may argue that the cap should remain due to the financial crisis legacy.
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