Allied Irish Banks has been forced to drop plans to pay €40m in bonuses to staff, according to reports.
This morning’s Financial Times says the move comes after Irish finance minister Brian Lenihan threatened to withdraw taxpayer support for the bank if it paid out the money to 2,500 employees.
Lenihan wrote to the bank yesterday making clear its financial survival depended on not paying the bonuses.
Last week AIB said it was legally obliged to pay the bonuses which are being paid in respect of 2008 after legal action by staff members earlier this year and new legislation will be introduced to stop the bank facing legal challenges.
AIB has already received €3.5bn in state aid and the Irish Government is expected to provide the bulk of the €9.8bn of extra capital the bank must raise as part of the conditions for Irelands €85bn bailout by the European Union and the International Monetary Fund.
The bank is currently 18 per cent owned by the Government, but that stake could rise to 90 per cent after the recapitalisation.