Pay cap lifted to help Bank of Ireland find boss

The government may relax its cap on bankers’ pay to allow Bank of Ireland to find a suitable new chief executive, Michael Noonan has said.

Richie Boucher, chief executive of the Bank of Ireland, announced last month that he would retire before the end of the year after almost a decade in charge of the country’s largest lender by assets, which has begun the search for his replacement.

Mr Boucher was appointed in February 2009, shortly after the state bailed out Irish banks. In March 2009, the government imposed a cap of €500,000 on annual salaries at the rescued banks.

Bank of Ireland said last week that the €500,000 pay cap out it “at an increasing competitive disadvantage in seeking to retain and attract staff, particularly those with certain skill sets and in international locations”.

Mr Noonan, the finance minister, said that as the government held only a 14 per cent stake in Bank of Ireland, it might be more flexible over pay than with the two other lenders it bailed out, which are still majority state-owned.

“We’ll see who the replacement is but Richie’s salary was never bound by the cap and we are only a 14 per cent investor in the Bank of Ireland,” Mr Noonan told reporters. “So if they appoint someone significant from outside, I think the parameters for negotiating pay will be somewhere in line with Richie Boucher’s . . . It will depend on who they find. It’s not decided yet.”

Mr Boucher’s gross annual salary was €690,000 throughout his tenure and his total compensation package was €958,000 last year. He was exempt from the cap as his salary was agreed before it was introduced.

Ireland’s two other domestically-owned lenders, Allied Irish Banks and Permanent TSB, have changed chief executives since Ireland’s banking crisis and had to adhere to the pay limits. Asked if he should get rid of the limits altogether, Mr Noonan said he would maintain the cap.

Speaking at a conference in Dublin hosted by the Central Bank and European Investment Bank (EIB), Mr Noonan increased Ireland’s growth target for this year as economic performance has been better than expected since the UK’s Brexit vote.

The growth targets were increased from 3.5 per cent to 4.3 per cent this year and 3.4 per cent to 3.7 per cent next year. The Irish economy was the best performing in the European Union for the third year in a row last year after gross domestic product grew by more than 5 per cent.

“We now have two quarters of hard data since the Brexit referendum,” Mr Noonan said. “They show that the immediate impact from Brexit has been more muted than initially anticipated. This is consistent with the trends emerging in the UK, US and euro area economies. Even the figures I announced today I would regard as conservative.”

The relevance of GDP as a measure of the health of Ireland’s open economy was called into question last year when growth for 2015 was revised up to 26 per cent after a massive revision to the stock of multinational firms’ capital assets. However, almost every other piece of data points to an economy continuing to grow.

Mr Noonan said the amount of budgetary space the government had to increase spending and cut taxes next year was “very very tight at present” but that he hoped it may loosen as the year goes by. He also called for greater infrastructure investment across the EU, including in Ireland.

“Low levels of public and private investment have been a feature of the post-crisis landscape,” he said. “We have also witnessed a prolonged period of below-trend productivity growth without much insight or consensus as to its cause. What we can agree on is that there are identifiable infrastructure deficits that can be addressed via concerted policy action.”

Ireland faces significant demographic challenges over the medium term which must be addressed, he added. He was “particularly keen”, he said, for the EIB, through the European Fund for Strategic Investments (EFSI), to increase its support of the Irish economy, particularly in the SME sector which faces the greatest challenge as a result of Brexit.