Payment of Bonuses in Bank of Ireland
Last December, the media reported that Bank of Ireland had paid a substantial bonus last year to a senior manager.
The Bank had repeatedly told the Department of Finance that no performance related bonuses had been paid to senior management. The Minister relied on this incorrect information in his replies to Parliamentary Questions about bank bonuses.
The Minister ordered an investigation of bonus payments made by Bank of Ireland since the introduction of the State Guarantee in September 2008. The attached report sets out the findings of this investigation.
· Senior Executive Team members in Bank of Ireland were paid previously contracted bonuses amounting to €4.3 million in the period.
· The bank says it is due to pay contractual bonuses of €0.6 million to Senior Executive Team members in 2011 and a further €0.2 million in 2012.
· The Bank has advised that payments of up to circa €11 million to up to 250 staff may be payable by the Group in 2011 under certain bonuses categories where payment has been deferred or with respect to retention payments.
The Banks says these figures remain under review and have been revised downward. The Government recently introduced a 90% tax on bank bonuses in the Finance Bill which will apply to any future bonuses paid by Bank of Ireland or any institution while in receipt of State support. The report recommends that any future support for Bank of Ireland be conditional on compliance with Government policy. The conditions that may attach to any potential future capital injections to the bank is a matter for the incoming Government.
The Report published today confirms that misleading information was provided to the Department for use in replies to Parliamentary Questions. Arising from this error, it is recommended that in future, material provided to the Department for use in Parliamentary replies should be personally authorised at senior executive level within the bank.
The information supplied by the bank for the diligence report carried out on behalf of the Department prior to recapitalisation in 2009 was incomplete and misleading.
However, it would appear that bonus payments made to the Senior Executive Team were in accordance with the Subscription Agreement governing the recapitalisation.
The Minister and the Department are dissatisfied with the approach of the bank to the overall investigation process and its use of a definition of performance related bonus which is at odds with normal usage. Such restrictive and uncommon interpretations are misleading and are inappropriate from a bank in receipt of taxpayer support.
The Minister has made it clear to the bank at the most senior level that the number of discrepancies which have come to light in the figures provided by the bank and the multiple points at which inaccurate, incomplete and/or misleading information was provided, particularly when the information was intended for Dáil Eireann, is unacceptable.
The investigation has raised serious issues about the Bank’s disclosures to the Department and its agents and the quality of its record keeping. There is considerable public anger about the level of support that has been required to protect our banking system. Every institution in receipt of State support has obligations to the Government, the Oireachtas and the citizens to be forthright and transparent in their actions, particularly relating to remuneration.
The Bank must seriously consider the implications of this report for the future conduct of its business and its remuneration policy. The Minister has accepted an offer by the Bank to pay €2 million to the Exchequer in recompense for misleading the Minister and the Oireachtas about this matter.