The Government may relax its cap on bankers' pay to allow Bank of Ireland to find a suitable new CEO, Finance Minister Michael Noonan has said. 

Bank of Ireland chief executive Richie Boucher announced last month that he will retire before the end of the year after almost a decade in charge of the country's largest lender by assets.

The bank has begun the search for a replacement. 

Since Richie Boucher was appointed CEO in February 2009, shortly after the Irish banks sought a state bailout, the Government has imposed a cap of €500,000 on annual salaries at rescued banks. 

In a prospectus issued last week in relation to a proposed share consolidation, Bank of Ireland said the €500,000 pay cap "places it at an increasing competitive disadvantage in seeking to retain and attract staff, particularly those with certain skill sets and in international locations." 

Michael Noonan said that as the Government held only a 14% stake in Bank of Ireland, it might be more flexible over pay than it has been with the two other lenders it bailed out, which are still majority state-owned.

"In the case of Richie Boucher's replacement, we'll see who the replacement is but Richie's salary was never bound by the cap and we are only a 14% investor in the Bank of Ireland," Mr Noonan said yesterday.

"So if they appoint someone significant from outside, I think the parameters for negotiating pay will be somewhere in line with Richie Boucher's. It will depend on who they find. It's not decided yet," he added.

Richie Boucher's gross annual salary has remained at €690,000 throughout his tenure and his total compensation package was €958,000 last year. 

AIB and Permanent TSB have changed chief executives since Ireland's banking crisis and had to adhere to the pay limits. 

Asked if he should get rid of the limits altogether, Mr Noonan said he would maintain the cap.