The chief executive of Bank of Ireland has said she would encourage a 'normalisation' of the remuneration landscape for bankers in light of government plans to start selling down the state's shareholding in the bank.

Francesca McDonagh said Bank of Ireland was not seeking special treatment, but that it was operating at a competitive disadvantage compared to other corporates in Ireland and banks across Europe.

The payment of bonuses at Irish banks has effectively been banned since the financial crash which resulted in the taxpayer pumping billions into the banking system.

Ms McDonagh said the restrictions were the 'right thing at the right time' but now was the time for a remuneration policy shift as the government prepares to sell down its near 14% stake in Bank of Ireland.

"We'd certainly encourage normalisation, particularly as we repay the taxpayer and we are returning to private ownership," Ms McDonagh told RTE News.

She said the bank was looking for 'regulated normalisation' in line with the European Banking Authority restrictions.

"There are parameters that we would operate within."

The Minister for Finance announced some months ago that the government intended to start selling down some of the state stake in Bank of Ireland, initially over a six month period.

It would pave the way for the state to start the final phase of exiting the bailed-out bank.

The bank's chief executive welcomed the announcement, saying it was a 'milestone moment' for the bank.

"Bank of Ireland had been the first and only Irish bank to fully repay the Irish taxpayer and it would now be the only bank to return to full private ownership. It's a watershed moment in terms of normalising the state's relationship with the sector," she said.

Ms McDonagh was speaking as Bank of Ireland reported an underlying pre-tax profit of €465 million for the first six months of the year.

That was a significant improvement on the loss of €669 million reported this time last year as the bank put aside €937 million for expected bad loans as a result of Covid-19.

The loan impairment charge for the first half of this year was €1 million.

"Our guidance is that, subject to economic conditions not changing, we would expect that to be maintained in the second half of the year.

"We agreed over 100,000 [Covid-19] payment breaks. That prevented Irish customers getting into arrears. 99% of those payment breaks have matured. People have gone back to regular payments and we've see little sign of asset quality deterioration or customers in arrears that were on those payment breaks."

Francesca McDonagh said she was not anticipating that the bank would extend negative interest rates on deposits further than the €1 million threshold at which they will apply in the coming months.

The bank has been charging corporates for large deposits for some time now and recently announced its intention to extend negative rates to individual customers with balances above €1 million, which will start to be applied from the second half of the year.

It also applies to businesses with balances of €1 million and above.

On the acquisition of stockbroker Davy, Ms McDonagh said the bank had no intention of abandoning the Davy brand, despite the Central Bank fine that was imposed on the stockbroker earlier this year for breaching market rules.

"We would have done our due diligence in a very robust way. We are very clear in terms of risks and opportunities in terms of any acquisition that we do.

"We feel confident in our own journey that we've been through around risk culture and governance. We hope that will be helpful and extended to the Davy management," she said.

Ms McDonagh confirmed that the bank would not have to raise any additional capital to finance the acquisition of Davy or the €9 billion in loans that it has entered into agreement with KBC to buy as the Belgian bank paves the way for an exit from the Irish market.