The salary of AIB’s CEO is once more a topic of interest as the bank tables significant annual profits. Conversations are underway between the bank and the Finance Minister regarding a review of this matter, coinciding with a decrease in the State’s stake in AIB. This has been a contentious issue, given AIB’s costly blunder in the property market two decades ago, which saw it costing taxpayers a sum of €20.8 billion. Of this, €13.7 billion has been recovered and the bank aims to repurchase €1 billion in shares from the Government this week.
Based on estimates, the State’s remaining stake in the bank, secured after fully nationalising the failing bank in 2010, is valued at €4.6 billion. Taking all into account, there is a deficit of €1.5 billion. Recurring dividend payments have been and are foreseen to continue following the bank’s return to profit. However, the true expense of AIB’s bailout goes beyond the confines of a spreadsheet. The State nearly crumbled under the weight of saving its banks, resulting in severe financial strain on Irish citizens due to the bailout conditions set by the International Monetary Fund, the European Central Bank, and the European Commission.
To make matters worse, there’s an underlying notion suggesting taxpayers are nearing a break-even point while forgotten is the fact that they are being reimbursed with their own money.
AIB, along with Bank of Ireland which was also rescued, for years imposed some of Europe’s steepest mortgage rates and offered minimal interest rates on deposits. Their healthy profits are derived from the gap between these rates and ultimately burden customers. It is only recently that Irish mortgage costs have regressed to around average EU levels.
The Irish banking market retains a bias towards the large banks’ shareholders over their customers, and lacks competitive edge. Evidence of this is AIB’s profits surge to €2 billion, a 170% increase. This was understandable from the national financial standpoint when the State owned the banks. As the banks steadily leave State ownership, this logic dwindles.
The notion that remuneration for top-tier management of two banks, benefiting from such advantageous state of affairs, ought to match that of international counterparts is fundamentally unsound.
The Chairman of AIB, Jim Pettigrew, persists in urging the Finance Minister to remove the salary limits, which were terms under the bailout. According to him, these limitations significantly threaten the maintenance of employees and, by association, the value of AIB to the public. However, unless there is a renewed competitive environment in the Irish banking sector, the response should be negative.