GUEST COMMENT: Just be thankful that the UK government sees the value in bonuses, unlike in Ireland
Madam editor: The UK has an Asset Protection Agency (UK Financial Investments Ltd) which oversees the taxpayers' investment in the UK banks.
Their role is to remove continuing uncertainty about the value of banks' past investments, cleaning up banks' balance sheets and providing them with greater confidence to rebuild and restructure their operations and increase lending in the economy.
They estimate that the UK taxpayer should reap 5bn from the scheme eventually and are committed to maximizing the return for the UK taxpayer. The taxpayer has moved out of the red on the 84% stake in Royal Bank of Scotland and 41% stake in Lloyds Banking Group after shares in the part-nationalised banks hit six-month highs.
So why has the UKFI written to the Royal Bank of Scotland (RBS) to approve its 1.3bn in bonuses to its investment bankers even though they had a veto when state owned Irish banks are not allowed to pay any bonuses. Simple, it maximises the taxpayers' return.
These bankers are paid between 3-7% of the 93-97% profit they return to the bank. The small relative savings made by reducing that percentage have a massive effect on the profitability of the bank.
Equally, in the UK there is a relative ease of mobility for top bankers between banks. There has been a slow haemorrhaging of talent from UK owned banks to more bonus friendly American banks.
The same is happening in Dublin. Some Dublin bankers have taken up vacant places at RBS and Lloyds. Of about a hundred key people on the Bank of Ireland and AIB trading floor, it is estimated approximately fifteen have already left.
Rumour has it that a large percentage of these key investment bankers have lined up lucrative contracts in the UK and are waiting solely for redundancy packages (to be announced within the next eight weeks at AIB).
So the question is, why are the AIB and BOI making no attempt to keep their top bankers? The answer is simple. The public have been shown a one sided argument from both the media and the politicians about investment banker excesses. The PR departments at both of the large Irish banks have remained silent when it comes to defending their top staff. Nor have they pointed out why they paid bonuses in the first place.
In Ireland, it is more advantageous politically to deny the bankers their bonuses even though it runs down the value of the taxpayers' investment. What Irish politician would put the taxpayers' interest before votes?
As the ECB contemplates rising rates and withdrawing the cheap liquidity it supplies Irish banks, the core banks mortgage books will remain loss making for probably the next 5 years.
The only intrinsic value in these banks is the quality of their top staff particularly in their treasury divisions as they will be the only profitable parts of these banks. Unfortunately these are the very areas where staff have had the greatest reduction in take home pay. They are also the most mobile and feel the greatest grievance towards their employer and the government.
The author is an anonymous Irish banker and AIB shareholder.
