Ireland ends post-crisis ban on bank bonuses, lifts pay cap

By Padraic Halpin

DUBLIN (Reuters) -Ireland will lift a crisis-era cap on top bankers' pay and allow lenders to pay bonuses of up to 20,000 euros ($20,758) as well as benefits such as healthcare for the first time in more than a decade, Finance Minister Paschal Donohoe said on Tuesday.

Executive pay was capped by Ireland at 500,000 euros a year in 2009 amid a massive property crash that exposed years of reckless lending and resulted in the euro zone's costliest bank sector bailout.

Dublin also banned all variable pay and fringe benefits for even junior staff in restrictions that lenders say has since hampered efforts to attract and retain talent in the face of competition from the country's large multinational sector and international banks expanding in Ireland after Brexit.

Donohoe, who began an independent review of Ireland's retail banking system a year ago, said ministers agreed to implement its recommendations in full.

They included a lifting of the 500,000 euro pay cap for Bank of Ireland, which returned to full private ownership this year. AIB and Permanent TSB should follow suit when the state's shareholding reaches an "appropriate" level, the review recommended.

The government owns 57% of AIB after recent share sales and 63% of Permanent TSB. Donohoe said the government had not decided what level their shareholdings will need to reach before the salary cap is scrapped.

Shares in all three banks were up by between 2.9% and 3.4% at 1420 GMT.

Analysts at Goodbody Stockbrokers said investors will likely welcome the potential stability of staff retention and removal of some recent pressure on fixed pay, even if it will likely push costs up in the short-term.

However ending the ban on bonuses has long been a politically contentious issue, particularly after fines levied on the major banks for overcharging mortgage customers recently hit almost 300 million euros.

The leader of Sinn Fein, the largest opposition party that has a wide lead in opinion polls ahead of elections in 2025, described allowing pay hikes for bankers as "really twisted" during an unprecedented cost of living crisis.

"We've all been here before, we've seen where gratuitous pay and self serving behaviour of big banks led us, it led us to financial disaster, economic crash and social catastrophe," Mary Lou McDonald told parliament.

($1 = 0.9635 euros)

(Reporting by Padraic HalpinEditing by David Goodman, Kirsten Donovan)