Top banker tells inquiry his earnings were 'unjustifiable'
The former head of Allied Irish Banks has claimed it was unjustifiable for him to take home millionaire pay packets in the years before the bank needed a €21bn taxpayer bailout.
Eugene Sheehy, who earned more than €7m during his time at the helm, told the Oireachtas banking inquiry that all top bankers’ earnings from the time were unacceptable.
“The numbers are very high, not justifiable in any way,” he said.
“I would say they are not justifiable. Period. No matter what time you are looking at. There’s no way you could tell anybody in the street those were acceptable levels of pay. That’s a fact.”
Mr Sheehy apologised for the devastating impact AIB’s €21bn bailout wreaked on Ireland but initially rejected claims of reckless lending by his old bank.
As the Oireachtas banking inquiry delved deeper into the contacts and negotiations that led to the cataclysmic €440bn blanket bank guarantee scheme of September 30, 2008, Mr Sheehy outlined his role in the corridors of Government Buildings.
The AIB chief had contacted coalition bosses to ask if he could take part in the talks and he was invited in for six hours but dismissed from the decision-making room on four occasions before leaving at 3.30am.
“When we saw the guarantee document the next morning we could not see why Anglo Irish Bank and Irish Nationwide were included,” Mr Sheehy said.
Mr Sheehy proposed a four bank guarantee, preferring it to be in place for two years, and suggested the toxic Anglo and Irish Nationwide would be let go bust.
He flatly rejected minutes on a Department of Finance memo that he warned AIB was at risk of bankruptcy.
“There was absolutely no issue about AIB’s solvency at the time,” he said.
Mr Sheehy also dealt with the idea floated by the late finance minister Brian Lenihan in November 2008 – known as Project Omega – that AIB would take over Anglo.
That was less than two months after the speculators’ bank was guaranteed by the Government against the advice of AIB.
“We were asked by the minister to seriously consider taking over Anglo. If the minister asks you, you do look at something,” the former banker said.
But Mr Sheehy revealed the plan was never put to the AIB board.
The former chief executive’s earnings peaked in 2006 at €2.4m, which included a bonus of €1.3m, but he insisted he played no part in determining bankers’ pay packets while in charge.
The 61-year-old waived €232,100 of his remuneration in 2009 and has a pension said to be worth about €250,000 a year.
Salaries and bonuses were decided scientifically using three external consultants and settled by non-executive directors at the bank, he said.
Mr Sheehy, who went on to study at Trinity College in his retirement, was joined at the banking inquiry by his predecessor Michael Buckley who led the bank from 2001-2005.
Both expressed regret over the impact bad lending policy has had on ordinary citizens.
“I’m very sorry for what happened and for my role in those events. I know a lot of people feel very let down, and deservedly so,” Mr Sheehy said.
He said that after a career of 38 years he had hoped to hand the bank over to a successor with it in good shape.
“That I failed in that responsibility for me is a matter of eternal regret and sorrow,” Mr Sheehy added.
Mr Buckley said he had no information that the bank was lending too much when he was in charge.
“I deeply regret what happened and the damage it inflicted on the lives of so many,” he said.
Ireland ultimately bailed out its main banks – AIB, Bank of Ireland, Permanent TSB, Anglo, Irish Nationwide and the EBS – with €64bn but Central Bank governor Patrick Honohan has claimed that the final cost will be closer to €40bn.
AIB, one of Ireland’s two main banks dating back to 1825, was effectively nationalised in 2010 – a year after share prices plunged and with a €21bn bailout.
On the suggestion of the then Central Bank governor John Hurley, both AIB and Bank of Ireland were called on to find €10bn to keep Anglo afloat at the end of September 2008.
Anglo and Irish Nationwide were both eventually nationalised and are being wound up as part of the Irish Bank Resolution Corporation.
Mr Sheehy said he believed the regulator, the now retired Patrick Neary, was dreadfully under-resourced in the mid-late-2000s.
“I found the regulator and his team to be diligent, hardworking public servants who always acted with integrity,” he said.