Tuesday, April 19, 2011

Pay Day at AIB

When the Covered Institutions Remuneration Oversight Committee reported to the Finance Minister in February 2009 they stated that ‘pension arrangements for senior executives in banks should be at least broadly similar to those applicable to the generality of the staff of the institution’ This Report also recognised that the top management of banks make little or no contribution for their pensions and recommended an appropriate balance between personal employee contributions and the employer contributions and the extent to which they employee contribution may need to be increased needed to be immediately reviewed

Why did the Department of Finance tolerate an agreement nine months later, in November 2009, to facilitate the payment to Colm Doherty, the former managing director of AIB, a cash payment of €2 million in lieu of a contribution to his pension? Given the trading results for 2010 and the overall circumstances of AIB, how is it possible, for this nationalised bank, to fully discharge such extravagant payments to a departing managing director - while thousands of AIB employees are facing the loss of their jobs and great uncertainty about their termination packages?

During his 1-year tenure from mid November 2009 AIB lost €10.2 billion and total assets decreased from €174 billion on 31 December 2009 to €145 billion at the end of last year. It was obliged to take a 54% haircut on the €18 billion of property loans taken over by the State. It lost its listing on the Irish and London Stock Exchanges and a taxpayer investment of €7 billion means that with 92% of the equity owned by the State it is effectively nationalised. Its shares now trade on the Enterprise Securities Market alongside the mom and pop operation.

Loans outstanding are €94 billion, of which €56.8 billion are either in residential mortgages or property and construction and almost 30% of them are wither vulnerable, impaired or under scrutiny. Customer accounts have dropped from €84 billion to €63 billion in a year and the Irish banks are generally unable to tap funding markets.

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