The huge outcry that met the Allied Irish Banks decision to award their traders £30m in bonuses has produced the correct response from the government. Now in a test of nerves we will see if the threat to cut and run by the bankers is real one?
The decision by Brian Lenihan to refuse to hand over any more cash to the stricken Allied Irish Banks if it pays out €40m in bonuses to 2,400 staff is the most decisive move yet by a finance minister to stamp out the bonus culture. http://www.guardian.co.uk/commentisfree/2010/dec/14/irish-bankers-aig-brian-lenihan
No doubt motivated by the humiliation he faced by having to accept €85bn in aid from the IMF and the EU, Lenihan has gone further than Alistair Darling was prepared to when he was bailing out RBS at the height of the banking crisis two years ago. The fact that AIB felt it needed to pay bonuses at all demonstrates how badly broken the bonus system is. Logically it would seem implausible that anyone working at a bank needing a taxpayer bailout could be entitled to a bonus.
Rationally it would seem any banker working in such an institution would be ashamed to take a payout. But, across the Irish sea, bankers in the City were today watching nervously, aghast even, that the Irish government could take such an extraordinary step. Bankers have warned time and again that if their bonuses are curtailed, they will move to places where there are no such restrictions – robbing the country of vital income. With the round of rewards just starting in the City, new bonus guidelines from Brussels have prompted fresh threats of an exodus; but policymakers around the world now have a chance to see what really happens when the plug gets pulled on bonuses entirely.
Will 2,400 furious bankers walk out of the doors of AIB in Dublin and pitch up in Hong Kong, Singapore or even London? If AIB's doors fail to revolve we should start a campaign that demands governments to stop big bonuses.
