The head of the Bank of Ireland blames the salary cap for the departure of the CFO

Updates from the Bank of Ireland

A cap on the salaries of Irish bank managers introduced after the global financial crisis led to the surprise departure of the Bank of Ireland’s chief financial officer and called for a loosening of the rules more than a decade after Europe’s biggest bank bailout.

Myles O’Grady quit to take a higher paying job outside of banking after Bank of Ireland, one of Ireland’s three national retail banks, failed to meet the salary on offer.

O’Grady will stay through March 2022, and the company he is moving to was expected to be announced later on Monday.

The head of the bank, Francesca McDonagh, who secured an exemption from the salary cap when she joined the bank from HSBC in 2017, has long complained that the € 500,000 limit on executive salaries imposed after the Irish banking crisis in 2008 was problematic is.

“Myles’ decision to leave the Irish banking sector underscores the challenge that compensation restrictions pose for Irish banks in attracting and retaining talent,” she said in a statement.

“The lack of a level playing field means that the Bank of Ireland is at a competitive disadvantage compared to other companies, corporations and PLCs that are not restricted in the same way,” she said.

O’Grady’s predecessor in the job, Andrew Keating, left the company two years ago to join the building materials company, CRH Company. “

Better pay elsewhere also led to the departure of the CEO and CFO of AIB in 2018. In addition to the salary cap, bonuses are prohibited – something that AIB chairman Colin Hunt says has proven to be even more damaging to its ability to attract employees.

Ireland is home to a number of deeply rooted technology companies like Apple, Google and Facebook that are not subject to such restrictions.

“The Bank of Ireland is unique among Irish banks in that it is the only institution that has repaid Irish taxpayers in full, which we did in 2013,” said Patrick Kennedy, Chairman of the Bank of Ireland, in March.

The bank says it received around € 4.8 billion from taxpayers in 2013 and repaid € 6 billion, even though the state retained a stake. The Irish state currently still holds 12 percent of the lender but is moving towards a full exit.

“The state is now reporting a substantial gain from its stake in the group. With the taxpayer fully repaid, the Bank of Ireland believes that it should now be allowed to develop a normalized approach to remuneration, ”said Kennedy.

The state owns 71 percent of rival Allied Irish Banks and 75 percent of Permanent TSB, according to Eamonn Hughes, a financial analyst at broker Goodbody, who noted that other countries in the EU and the UK that had also bailed out banks have “moved on” ” and loosened caps.

O’Grady’s departure follows the departure of other senior officials from the AIB and PTSB. In view of the fluctuating government support according to opinion polls and the still dominant Covid-19 pandemic, analysts do not expect any rule changes in the short term.

“While the political will to adopt a more appropriate compensation structure is likely limited at this time, a more balanced approach is needed to ensure that talent is attracted and retained in the sector,” wrote Diarmaid Sheridan, analyst at Brokers Davy, in a note for Customers.

In fact, Michael D’Arcy, former Treasury Secretary, told the Financial Times in 2019: “Executives get very high salaries and for as long as the state owns” [their banks], I am satisfied that the salary caps are reasonable. “

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