May 10, 2021

Back to ERE and bank salaries



The new challenges facing banks, in a scenario of negative interest rates, immersed in an economic crisis, and with digital banking on the rise, require financial institutions adjust costs in order to maintain business and profitability. The only meaning at this time of mergers in the banking sector is take advantage of synergies to maintain income with less expenses. And that, as painful as it may be, means closing offices and reducing the number of employees. The Government knew this when it authorized the merger of Bankia and CaixaBank. In fact, the FROB, which is part of the Council of the new entity, and which depends on the Ministry of Economy, has supported the ERE of more than 8,000 people raised by the entity resulting from the merger, and has also voted in favor of raising the salary of the former president of Bankia.

Jose Ignacio Goirigolzarri, as Chairman of the new CaixaBank, will receive a fixed annual remuneration of 1.65 million euros, to which you can add a variable remuneration of up to 200,000 euros in case of meeting objectives, according to the proposal that will be submitted to a vote at the shareholders’ meeting on May 14. Faced with these figures – still lower than many of the salaries charged by bank executives – as Bankia’s top executive, Goirigolzarri received 500,000 euros in 2020 and gave up the variable part of his salary. And the thing is that Bankia, like all the entities that received public aid during the financial crisis, had limited the salaries of managers since 2012.

Luis de Guindos, now vice president of the ECB, proposed a reform of the financial system that included the limitation of salaries. A measure that did not elicit unanimity from the Council of Ministers, at the beginning of 2012. In fact, De Guindos had the support of the then Foreign Minister, Jose Manuel Garcia Margallo and that of Industry, Jose Manuel Soria, but met with opposition from the Minister of Finance, Christopher Montoro. Finally, the measure went ahead and affected in the first place its own Rodrigo Rato.

These days we are witnessing the relentless attack launched by the Government on the banks due to the fact that financial entities in which their managers charge millionaire salaries present EREs that affect thousands of employees. The Vice President of the Government, Nadia calviño, has not only criticized the situation, but has tried to get the Bank of Spain in the thick of it, and has asked it to act. But the criticism sounds more like electoral eve populism than real intentions, because if not, the position of the FROB in CaixaBank is not understood.

We can all understand that in times of adjustment, managers should be the first to tighten their belts. And of course, there is no point in charging bonuses if the bank is in trouble. The European Commission and the ECB asked at the beginning of the pandemic to limit bonuses and restrict dividends so that entities would have more strength when facing the economic crisis that we are experiencing. And in most banks the salaries of executives have been reduced, and could do so more, although I doubt that a bank without public aid can be told how much its executives should charge. But What cannot and should not be prohibited is that banks, like any company, adjust employment to their needs. Another thing is pure populism that sooner or later we would pay dearly.

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