AIB employees earning more than 50,000 euro will be banned from moving to Goodbody for two years, following the bank’s purchase of the stockbrokers.
AIB announced it has reacquired Goodbody Stockbrokers in a 138 million euro deal on Tuesday, more than five times the price it received when it was forced to sell the asset under the state bailout a decade ago.
Finance Minister Paschal Donohoe announced measures on Tuesday to protect the Government’s policy on banking remuneration – which includes a 500,000 euro pay cap.
Todayâs announcement by AIB of its acquisition of Goodbody is a positive outcome for the Irish economy. It will be good for & will strengthen the 3 Irish businesses involved: AIB, Goodbody & Fexco. Good news too that AIB is to establish a â¬50m SME Equity Fund https://t.co/aU4dH1BRG5— Paschal Donohoe (@Paschald) March 2, 2021
Mr Donohoe sought to allay fears that this could lead to bank employees switching over in a bid to circumvent the Government pay cap.
The Minister said: “Although AIB is acquiring a business with variable pay structures, the bank will continue to strictly observe the Government’s restrictions.
“Controls and measures are in place under this deal to provide complete transparency in this regard.
“Post-completion of this transaction, remuneration provisions at Goodbody stockbrokers will be completely ring-fenced from the rest of the group.”
Mr Donohoe said that a small number of AIB staff will transfer to Goodbody “in order to avoid any duplication of activities”.
He said this would see 20 people transfer once the acquisition gains regulatory approval.
There will be 10 employee transfers in the year after that, and five the following year.
He added: “There will also be a restriction on Goodbody hiring any person, with a total remuneration package above 50,000 euro, who was an employee of AIB or any group company at any time within the previous two years.”
We have put safeguards in place to protect the integrity of policy in this area to deal with the risk of what might happen if people were to leave AIB to go and work with Goodbody.Paschal Donohoe, Finance Minister
Mr Donohoe continued: “The banking remuneration policy for people who are currently working in AIB, and will continue to work in AIB… it is not changing with this decision.
“For people who are working in Goodbody, the way in which they are being paid, that itself also will not change.
“Because when this policy was put in place in relation to banking pay, it was only expected to be covering off retail banks, as opposed to a stockbroking business like Goodbody.
“We have put safeguards in place to protect the integrity of policy in this area to deal with the risk of what might happen if people were to leave AIB to go and work with Goodbody.
“And that is why we put in place the safeguards that have been outlined today.
“Acknowledging that in order for the business to be integrated a number of people will need to be moved into Goodbody to do this, but there’s a cap on that.
“We’re also making clear in the letter of consent that we supplied to AIB that you cannot leave AIB, and then go and work in Goodbody’s.
“That is why we’ve laid down a two-year period, within which somebody who’s left AIB can not then go and work in the stockbroking business that Goodbody’s will be running.”
Mr Donohoe said he was “absolutely aware of the sensitivity of this issue”, with pay caps being introduced in the wake of the banking crisis amid a wave of public anger.
But he said he had greenlighted the AIB’s purchase of the stockbrokers as recent difficulties in the sector have highlighted the importance of successful banks to the Irish economy.
He said: “A couple of weeks ago we have been reminded of the importance of banks that are in Ireland, and indeed banks that are owned by Irish taxpayers, of ensuring that they have more diverse business models, they’re able to supply and more services to customers.
“And in turn, ensuring they have a more viable future.”
He said he believes the decision struck the right balance between protecting the integrity of the Government’s pay policy and delivering the sale.