IRISH EDITOR'S TAKE: Let's be honest, AIB's capital markets staff deserve those bonuses

As we exclusively revealed yesterday, AIB is set to shell out €40m to pay its capital markets staff backdated bonuses from 2008.

The resulting furore has been both surprising and laced with tub-thumping anti-banker vitriol. The timing of the move - just before Christmas and immediately after one of the most austere Irish budgets in history - could, of course, have been better.

At close of business yesterday, AIB's market capitalisation was a mere €690.3m. The bank needs to raise €5.2bn by February to reach its 14% tier one capital ratio demanded under the EU-IMF rescue plan, and the smart money is on AIB coming under full state control very shortly. Paying out €40m in bonuses is, therefore, not ideal.

In an era when it's acceptable for a certain Irish tabloid to label bank employees 'wanker bankers' any time they're mentioned, it's easy for commentators to score some publicity points by condemning the payouts.

Opposition party Fine Gael has already called for a 99% super-tax to be applied to the bonuses, while IDA Ireland chief executive described the move as 'bizarre'.

Let's not forget that this all stems from the case of trader John Foy, who successfully sued the bank for withholding his 2008 bonuses. This 'test case' showed AIB that, as far as the High Court was concerned, it didn't have a leg to stand on - it was contractually obliged pay - and it had little option but to honour the remaining payments.

These bonuses were due to be paid in January 2009, but were deferred under the government's bank guarantee scheme, so it's taken nearly two years for AIB to pay out.

In 2008, AIB made a profit of €862m, compared to €2.2bn in 2007. Its capital markets division was €585m in the black - a 10% increase on the year before.

Whether or not it's palatable to the Irish public now, many front office employees within the capital markets division were incentivised by being rewarded for performance. The bonus always constituted the largest proportion of total remuneration and they earned that money - in 2008.

AIB's executive chairman David Hodgkinson has already said the move "reflects the past". It's just unfortunate that the bank had to pay these bonuses in the present.