Being legal with the truth

The Minister for Finance has said senior people in banking circles in Ireland made appalling lending decisions. I pointed out to the Taoiseach in the House previously that, under section 50 of the guarantee scheme, where this scheme is being brought into disrepute, the Minister for Finance may require certain obligations of the scheme to be adhered to and he may specify in writing to the covered institution in question what those obligations might be. Hundreds of thousands of people in our country are out of work and many thousands, as we speak, are scrabbling to put the few cent together to meet the increased rate in variable mortgage repayments, yet we have a situation where Bank of Ireland, a covered institution, has approved a €1.9 million top-up in pension for its chief executive and the Taoiseach and his Government stand idly by, despite the fact the Minister for Finance said that senior bankers had made appalling lending decisions.

At a time of economic crisis for many thousands of our people, is the Taoiseach happy that Bank of Ireland approves a €1.9 million top-up for its chief executive? Is he prepared to invoke the section of the guarantee scheme which gives the Minister for Finance authority from Government and in law to intervene, specify in writing and have this decision reversed? Is he happy to sit idly by in the knowledge that he can intervene and can have this reversed on the instruction of the Minister for Finance?

The Taoiseach:  We have set up a banking inquiry to look into all issues related to lending practices and other things that have been happening in the retail banking sector and the building society sector. That will be dealt with as we set it out and that is the place where we can deal with all of those issues.

On the specific matter of the Bank of Ireland, the facts of the situation as I understand them are that a €1.49 million contribution was made by the bank to the Bank of Ireland pension fund and was not made to Mr. Boucher personally.

Deputy Charles Flanagan:  Whose benefit was it made for?

The Taoiseach:   I understand he is not receiving any additional pay or pension entitlements.

Contrary to how this is being portrayed, this is a payment into an overall fund that provides for pensions for most Bank of Ireland staff. If it was not made, the fund would be short of resources to meet its obligations to all Bank of Ireland pensioners and staff who will retire in future. It is a payment that is being made to the bank staff pension fund to sustain the agreed pension of the chief executive, a pension based on his salary, that is now controlled by the Government under the Covered Institutions Remuneration Oversight Committee. The payment is into the pension fund because, unlike public service pensions, it must be pre-funded and is to cover the contractual arrangements, allowing Mr. Boucher to retire when he is due to retire. This payment is as required. Contrary to speculation, it does not undermine the salary cap imposed by Government on the sector’s executives and directors of the covered financial institutions that was introduced by Government last year.

The subscription agreement for recapitalisation provided that no pension enhancements would be awarded without prior consent. This is not an enhancement but the ongoing application of existing rules for chief executive officers. The oversight committee recommended pension arrangements for senior staff in the Bank of Ireland should be broadly similar to the generality of its staff and a significant review of the overall scheme is under way at present. Those are the facts of the matter in that situation.

The salary was capped at a very well remunerated level, although it is less than what the gentleman was on when he was head of retail banking. I do not hold any brief for that; I am explaining that the portrayal of this as a direct payment to Mr. Boucher is incorrect. It is a payment to the pension fund to ensure the pension already agreed under his contract is paid, as with other pensions in that fund for staff.

Deputy Enda Kenny: That reply is a complete and utter whitewash and the Taoiseach knows it. The Covered Institutions Remuneration Oversight Committee, which was set up by the Government and reported on 27 February 2009, warned the Government of what could happen here. Its report contained the following:

We consider that pension arrangements for top management should be reviewed. We have become aware of a practice in which cash allowances were paid to compensate for the effects of the “pensions cap” imposed by the Finance Act 2006. Pension schemes should reflect public policy and tax law and it is unacceptable that arrangements should be put in place which would be inconsistent with the intent of the relevant legislation.

The Taoiseach did not mention that the chief executive in question is getting €123,000 per year as a top-up in addition to what is happening here in respect of his pension. While the chief executive is receiving this €1.9 million top-up in his pension, the generality of the staff in Bank of Ireland are expected to take pension reductions and the rest of the public are expected to work years longer to pay off the debts of these banks, while thousands of people are scrabbling around to meet the repayments on their mortgages.

In addition, the oversight committee, set up by the Government for the purpose of advising it, stated: “Pension arrangements for senior executives in each institution should… be at least broadly similar to those applicable to the generality of the staff of the institution.” The Taoiseach has acted outrageously here. At a time of economic crisis, this bank, a covered institution we have put €3.5 billion into, and about which public watchdogs may or may not have reported to the Taoiseach, expects the public to wear a situation where the chief executive gets a top-up of €1.9 million to his pension. It is outrageous and an affront to every person in this country. If the Taoiseach has any courage and gumption, he will invoke section 50.

The Minister for Finance agreed with these recommendations when he said they were appropriate. What is appropriate for the Minister for Finance is irrelevant to the Taoiseach when he says he will allow the board to top up the chief executive’s pension by this order when the rest of the workforce is expected to take pension reductions and the population at large is expected to bow down under the crucifixion imposed by reckless and, as the Minister for Finance said, appalling lending decisions that the Irish taxpayer will be paying for in the years ahead.

Is the Taoiseach prepared to intervene and see that this top-up, which amounts to a pay rise, is reversed?

The Taoiseach: The facts of the situation are contrary to how the Deputy is asserting them. I understand the public perception and I hold no brief for the Bank of Ireland pension fund. I am just setting out the facts of the situation.

From the Government’s point of view, we have capped the salaries and we have ensured no bonuses are being paid. There can be no enhancements of pension entitlements relating to existing pension entitlements under the contracts for CEOs in that institution. It is not a payment to Mr. Boucher directly but a contribution to the Bank of Ireland pension fund to ensure there are sufficient funds in the pension fund to sustain all pensions, including the pension the CEO will receive when he retires.

I hold no brief; I just want to give the facts of the situation. I have also stated clearly that the subscription agreement provides for no pension enhancements to be awarded without prior consent. Since this is not an enhancement, although I can understand the situation, it does not require prior consent so the idea of intervening does not arise in that respect.

Deputy Enda Kenny:  The Taoiseach should stop it.

Deputy Eamon Gilmore:  The Taoiseach makes it sound as if this top-up to the pension fund is for the bank’s porters and tellers. It arises directly from the change in the contractual arrangements that were made for the chief executive of the bank.

Under the terms of the credit institutions legislation, did the Government or the Minister for Finance approve this top-up arrangement? Does the Minister for Finance intend to exercise his powers under the credit institutions arrangements whereby it can control these matters?

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The Taoiseach: …. Regarding the previous question on the Bank of Ireland, I stated already to Deputy Kenny that since the scheme does not involve an enhancement of existing pension provision for chief executive officers no prior consent was required of the Minister in that respect. We are talking about ensuring that from a trustee’s point of view there are sufficient funds in place to meet these pensions in the future. That is the point I make.

An Ceann Comhairle:   A final supplementary from Deputy Gilmore.