THE CAP ON bankers’ pay of €500,000 is to be scrapped, Finance Minister Paschal Donohoe announced today.

The State has now completed the final sell down of its shareholding in AIB and no longer has a shareholding in that bank.

Due to the State having no longer having a stake in the bank, the minister said it is no longer appropriate to have a say in the salary scale in the institution.

The sale of the AIB shares follows the State exiting its Bank of Ireland shareholding in September 2022.

The State retains a 57.4% shareholding in PTSB, which the minister said will continue to be assessed.  

While a stake is still held in PTSB, the minister announced today that that ending of the banker pay cap will apply to both AIB and PTSB. 

The Irish State took stakes in AIB, Bank of Ireland and Permanent TSB during the banking crash, with the Government taking measures then to cap the pay of top executives at €500,000. 

Over the years top executives of banks as well as some within the Central Bank have argued for pay caps to be lifted in order to help with retention of bank staff and to increase competition in the sector. 

As far back as 2018, Donohoe indicated that he was in favour of higher wage levels, and due to the increasing competition in the sector, called for a pay assessment to take place. 

He told The Journal today that with the lifting of the pay cap aims to attract investment and ensure a competitive banking sector. 

When asked about Irish mortgage-holders now paying the fifth highest mortgage rates in the Eurozone, Donohoe said the message is Ireland is a good place for other international banks to do business, stating that more competition in the Irish banking sector would be welcome. 

Speaking about the specifics around the cap being lifted, the minister said it would be done in the coming days, stating that no new legislation is needed for the change. 

A total of €29.4bn was invested in AIB, Bank of Ireland and PTSB over the period 2009 to 2011. To date, around €29.4bn has been recovered in cash by way of disposals, investment income and liability guarantee fees.

The remaining investment in PTSB is currently valued at c. €0.6bn leaving a surplus of around €0.6 billion. The minister said the divestment from AIB will mean the money will now be available to ramp up infrastructure. 

“That money would be available to support the delivery of the infrastructure, the water, the energy, the transport that is needed in Ireland to deliver more homes,” said the finance minister.