BANKS' PAY STRUCTURES STILL A MAJOR CAUSE OF CONCERN - AIB has told RTÉ that it is misleading to say the bank did not defend proceedings bought against it by former currency trader with the bank John Foy to get his 2008 bonus. Yesterday the Sunday Business Post said that AIB put up no defence in the bonus case, which triggered payment of some €40m in bonuses to almost 2,500 staff. There is a subtlety in what the paper argues - rather than the High Court deciding the bank was legally obliged to pay the 2008 bonuses, which is how the story is being presented, it appears AIB made the decision to pay the bonuses because it declined to file a defence. However, the bank says that interpretation is misleading. 'To say the bank did not defend these summary proceedings is misleading. To be allowed by the court to enter a defence, the bank would have had to swear an affidavit that it had a bona fide defence and was not simply seeking to postpone judgement', the bank said in a statement. The bank received external legal advice that it did not have a bona fide defence and therefore could not swear that it had. This advice was subsequently repeated by another external legal firm, it added.
Frank O'Dwyer, from the Irish Association of Investment Managers, says that if AIB had contested the bonus issue, it would have resulted in lengthy court battles - paid for by the taxpayer. He says this would not have been satisfactory. He says the most annoying thing arising from this row is the issue of remuneration at the banks. He says the regulator was disappointed with a recent review it conducted on pay packages and practices in a number of Irish banks and says that two years after the banks' crisis, the issue of pay structures at the banks are still a major cause of concern.
Mr O'Dywer says that no-one should be rewarded for taking on risks and the banks need to fundamentally look at their pay structures. He says that a major slice of any bonus should be held back over a number of years to ensure that any risks taken resulted in long-term and proper profits for the bank.
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MORNING BRIEFS - The Financial Times reports that European officials are considering plans to overhaul the euro zone's €440 billion rescue fund, and use it to buy bonds of distressed governments. Monies from the European Financial Stability Facility could, according to the FT, be directed to provide short-term credit lines to countries struggling to borrow on the market but not in need of a multi-year bail-out package. The paper says officials had hoped to discuss changes to the rescue fund at a summit of European leaders this week, but Germany wants any talk postponed until next year.
*** The monthly Ulster Bank measure of confidence in the construction sector showed an acceleration in the rate of contraction in the sector for November. Business sentiment, the forward looking measure of future confidence, was negative for the first time in 11 months because of touted spending cuts in the December budget. Meanwhile the level of job losses was at its highest since May because of falling workloads. The decline in civil engineering activity is at its fastest since September 2009. New orders have decreased in all but two of the past forty-four months, with the latest fall the sharpest since April.
*** On the currency markets, the euro is worth $1.3194 US cents and 83.57 pence sterling.
