Francesca McDonagh has announced her surprise decision to resign as chief executive of the Bank of Ireland, the country’s biggest lender, in what industry sources say is the latest high-profile victim of a top executive pay cap.
The bank, which was bailed out along with other Irish lenders in the eurozone’s biggest bank bailout after the financial crisis more than a decade ago, said McDonagh would step down in September.
An industry insider called remuneration “a growing risk factor now within Irish banks. . . that can no longer be ignored.”
“I understand that the decision is absolutely related to remuneration. . . we are seeing executives leave the banking sector, for more attractive remuneration packages in other sectors”, added the source.
BoI has now lost two CFOs and a CEO to the issue “despite having paid off its debt to the Irish state nearly a decade ago,” the source said.
An announcement about his new position was expected to be made on Wednesday, according to another source who confirmed his decision had been influenced by pay.
McDonagh, who was granted an exemption from the 500,000-euro limit on executive pay imposed after Ireland’s banking crisis in 2008, could not be immediately reached for comment.
Ireland’s three major banks have been forced by law to cap top executive pay since the bailout. In addition, the rules prevent some 23,000 employees, from the youngest to the oldest, from obtaining bonuses or other benefits, such as health insurance and child care.
London-born McDonagh, who became the group’s chief executive in October 2017 after working for HSBC, told the Irish Business Post newspaper in an interview in March that pay and bonus restrictions were “out of step with the current reality”, especially as BoI is expected to return to full private ownership this year.
The state currently owns less than 5 percent of the lender, which reported a pre-tax profit of €1.4 billion for 2021.
“I fully understand why [the restrictions] arrived at his place. It was the right thing to do at the time,” McDonagh told the newspaper. But he said it was “wrong” that Irish banks had to compete for talent “with one arm tied behind their back”.
“We are not looking for restrictions to be [fully] fell, we’re just looking. . . be regulated like any other bank we compete with,” she said.
Myles O’Grady resigned as BoI’s chief financial officer last September to take up the same role, with better pay, at Irish retail giant Musgrave Group, which owns the SuperValu supermarket chain. His predecessor in his job, Andrew Keating, left in 2019 to join building materials firm CRH.
Paschal Donohoe, the finance minister, said the BoI had “thrived” under McDonagh’s leadership. “She was instrumental in driving a change in culture within the bank, seeing through the IT transformation program and also played a key role in helping clients and the country get through the recent Covid-19 crisis,” he said. him in a statement.
The finance ministry has not said whether it plans to ease restrictions on executive salaries and staff bonuses, but the issue is expected to be discussed at a conference with stakeholders on May 16.
Ireland’s banking sector is in the midst of turmoil with the exit of Ulster Bank and KBC from the sector. BoI has hired 500 new employees to help manage customers who switch accounts when lenders leave.