AIB U-Turn On Bonuses After Lenihan Threatens Bailout Cash

Allied Irish Bank has agreed not to pay over €40m in bonuses to 2,500 senior staff, after a massive public outcry.

Finance Minister Brian Lenihan threatened not to give the bank any further bailout money if action wasn't taken.

Mr Lenihan said he found it "galling" that the bonuses were being paid, at a time when everyone else in the country was making sacrifices.

He wrote a letter to the AIB board, pointing out that without State support, AIB would not have survived.

And he said any further State support would be conditional on the non-payment of bonuses awarded, no matter when they had been earned.

The bank had previously claimed that it was under a legal obligation to pay the staff the bonuses, which relate to work done in 2008, due to a High Court ruling in the UK.

One trader, John Foy, took legal action to secure his bonus and the bank was advised it didn't have grounds to challenge the case.

A further 90 traders also initiated legal proceedings - they worked for a profitable division of the bank, AIB Capital Markets, and claimed they were entitled to their performance-related bonuses.

It's not yet known if the Minister's intervention be enough to block the bonuses to them.

In legal terms, the Minister's letter may constitute a "supervening incident", and give the bank wriggle room not to make the awards.

AIB chairman David Hodgkinson said "The board of AIB very much welcomes the action of the Minister and is relieved to be in a position not to pay these bonuses.

"We are determined to position the bank to play a full role in the recovery of the Irish economy. In doing so, we are committed to treating our customers, staff, the taxpayers and the public in a fair and transparent manner."