LAST WEEK THE Taoiseach said bonuses should not be reintroduced for bankers after bank officials suggested pay restrictions should be relaxed.

Although the pillar banks are pushing for changes in a bid to retain staff, he said he would not like to see the sector moving back into the bonus culture.

“The most appropriate way, I believe, to reward workers in the private sector is through things like share options, for example,” he said.

The departments of Finance and Rural and Community Development have recently completed a report looking at whether a model of community or public banking could work in Ireland.

Earlier this month Minister Michael Ring said the report is likely to be published in the coming weeks. As part of this reporting process, he said the team had engaged with Irish Rural Link and the Savings Bank Foundation for International Cooperation (SBFIC), which is the international development wing of the Sparkassen German public banking group.

The German model of public banking falls in between the private commercial banks we are used to in Ireland, and the credit union model.

These banks would offer the same kinds of loans as commercial banks currently offer, but with more favourable terms.

Harald Felzen, European project manager for SPFIC told TheJournal.ie that every country has its own labour and salary regulations but Sparkassen [public banks] in Geramany are public bodies under municipal trusteeship.

“Therefore the salary agreements with Sparkassen staff are basically identically equal to the civil servant agreements,” he explained. “Bonuses for staff are not common practice.”

He said there are salary agreements that comprise success-oriented components, like customer satisfaction, but the amount is normally 10% of the annual salary at most.

“Management board members are exempted from this. They have special salary agreements in each federal state – mostly similar. Their success oriented components comprise usually 20 to 25% of their annual salary.”

Management at AIB had recently proposed introducing a bonus package worth up to 100% of salary in an effort to allay the risk of executives leaving the bank for higher paying jobs elsewhere.

Seamus Boland, who is CEO of Irish Rural Link said Ireland’s banking system has still not returned to health eight years after the recession.

“Instead of being able to support fully the ongoing needs of existing and new small enterprises; they continue to be mired in controversies which do nothing to enable a very sceptical public to have confidence in them,” he said.

Unbelievably, they now want to re-introduce the infamous bonus systems, while doing nothing to increase access by small business to essential banking systems.

He said this alternative system of banking would, in many ways complement mainstream banking.

“Failure to develop an alternative banking system on the lines proposed, will condemn our regions to being unable to develop in economic terms for the foreseeable future,” he added.

“The implication is that, many of our younger generation will continue to leave these areas.”