Banker Pay Limits ‘Huge Concern,’ Investors Warn Irish State

(Bloomberg) -- Irish bank pay caps and bonus restrictions are now a major worry, a group of investors told Finance Minister Paschal Donohoe, as the government weighs whether to ease pay caps at bailed-out lenders.

Donohoe met a shareholder group brought together by Deutsche Bank AG in Dublin on Nov. 22. At the meeting, investors told Donohoe that restrictions on executive pay at AIB Group Plc and other partly state-owned lenders are “now a huge concern” even as they recognized the political sensitivity around easing restrictions, according to an internal summary of feedback prepared for the minister.

The documents were released to Bloomberg News through a Freedom of Information Act request.

The group of six investors, led by Deutsche Bank’s David Lock and Rolf Zartner, highlighted the decline in AIB’s stock after Chief Executive Officer Bernard Byrne resigned in October, the summary noted. Among the group planning to attend the meeting were representatives from Artemis Investment Management LLP, Citadel LLC and M&G Investments.

AIB shares fell as much as 1.5 percent to 3.97 euros, and traded at 4.02 euros at 11:21 a.m. in Dublin.

The Irish government caps salaries at 500,000 euros ($545,500) and banned bonuses at AIB, Bank of Ireland Group Plc and Permanent TSB Group Holdings Plc as part of state bailouts during the financial crisis. Even if bonuses are reinstated, payments over 20,000 euros would face an 89 percent super tax. Donohoe rejected an AIB plan to reinstate bonuses last year.

The government has hired Korn/Ferry International to review the caps. While that review may recommend easing the constraints, Donohoe told Bloomberg News in January he had no plans to ease the restrictions.

Before the meeting, a briefing note prepared for Donohoe highlighted that while the restrictions “are having an impact on recruitment and retention” for the banks, “the politics of this are very difficult” which left him unable to make “promises” in relation to the pay caps.

On the timing of future bank share sales, investors “took comfort” that Donohoe remained committed to selling down the government’s stakes according to the notes. He underlined it was important to execute “a series of successful transactions rather than focusing on getting the next one completed,” the summary said.

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