Ireland Prevents Bank Bonus Payout
The New York Times reports:
LONDON — Allied Irish Banks, the lender that is being bailed out by the government, has decided not to award senior staff about 40 million euros ($53 million) in bonuses for 2008 after the country’s finance ministry intervened late Monday.
Ireland’s finance minister, Brian Lenihan, told RTE radio on Tuesday that it was “galling to think” that at a time when taxpayers were investing in the bank, 36 million to 40 million euros “would be paid out of that bank to employees in respect to bonuses during a period that the bank got itself into the difficulties it is now in.”
The bank has already received 3.5 billion euros in government aid.
The ministry acted after months of public outrage over the bonuses to be paid to 2,400 senior bank managers at a time when Ireland was seeking an international bailout of 85 billion euros, largely because of weaknesses in its banking sector. In a letter Monday to the Allied Irish board, Mr. Lenihan said that further cash injections by the government — which the bank desperately needs — were dependent on the condition that no bonuses be paid.
“The provision of further state funding to A.I.B. will be conditional, inter alia, on the nonpayment of any bonuses, no matter when they may have been earned,” Mr. Lenihan wrote. He told the cabinet at a meeting Tuesday that the provision on the bonuses would be added to a bank restructuring bill being discussed.
The legislation, which is to be debated by lawmakers on Wednesday and could take effect by the end of the week, would allow the government to shrink the banks and restructure the financial sector.
Some analysts were quick to ask why it took the government so long to step in. Mr. Lenihan said the government first had to consider several options, including the introduction of a special tax on the bonuses.
“Without a measure of public acceptance, no government could provide support for the banks on the scale needed,” Mr. Lenihan wrote to the Allied Irish Banks board. “The bank could not have continued to operate without this financial support and the employees claiming the bonuses would almost certainly have had their employment contracts terminated.”
