The Central Bank governor has written a letter to the Minister for Finance in which he makes a case for the return of variable pay in the sector.
Currently, there is a €500k pay cap in place, variable pay is not allowed and even if it was paid, it is subject to an 89% tax rate. The governor suggests there is a case to be made for the return of variable pay as banks are struggling to hold onto key staff and face competition from other sectors and relocating British banks.
The governor suggested that variable pay provides enhanced flexibility and if executed effectively, can support and incentivise behaviours that are consistent with good customer outcomes.
According to Goodbody Stockbrokers, "The Central Bank stance shows a practical approach to an issue which has been providing headwinds for the sector for a number of years. However, irrespective of the Central Bank advice, the issue is still clearly a politically sensitive issue, particularly given all the recent speculation about possible general elections, so political parties are likely to tread carefully/slowly on this issue."