Ireland’s Allied Irish Banks said on Monday it would not pay bonuses to executives after the finance minister threatened to stop state support for the bank if the extra money was paid out.
Media reports said last week that Allied Irish would pay out 40 million euros (US$53.7 million) to some of its executives in bonuses for work that was done in 2008, prompting a storm of criticism among policymakers.
Once the state’s largest listed lender, Allied Irish is facing a majority state ownership because of additional capital requirements.
The government was forced to seek an 85 billion euro IMF/EU assistance amid rising nervousness about future loan losses at its banks, whose reckless lending practices fueled a property bubble that plunged the country into crisis.
Irish Finance Minister Brian Lenihan had written to AIB saying state support would be “conditional on the non-payment of bonuses awarded, no matter when they may have been earned,” a statement said.
AIB said in a separate statement that while the board received legal advice that it was obliged to pay these bonuses, Lenihan’s letter had made them reconsider.
“The bank very much appreciates the support it has received to date from the state and the Irish taxpayers and acknowledges that it will continue to rely on this support for some time to come,” AIB’s statement said. “Accordingly, the Board has decided not to pay the bonuses.”
Lenihan last week said he would impose a 90 percent tax on future bank bonuses, in a budget bill due to be voted on early next year.
Lenihan criticized the freewheeling bank culture, saying taxpayers bearing the brunt of the crisis were entitled to see that “the fruits of that culture are clearly stamped out,” he told state broadcaster RTE.
About 35 billion euros of the 85 billion euro bailout will be channeled to the banks. About 10 billion euros will be used for immediate capital injections, and a further 25 billion euros will be kept as a back-up in case further injections are needed. Allied Irish Banks has lost 12 billion euros in deposits since the end of June, data showed last week.
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