FINANCE Minister Michael Noonan has cleared the way for bailed-out banks to begin paying bonuses to their top executives as early as next year.

All state-supported banks were banned from paying bonuses soon after they were rescued.

But new rules on how the Government oversees state- supported banks pave the way for "incentive arrangements" at AIB, Permanent TSB and Irish Bank Resolution Corporation, formerly Anglo.

The rules stress that all the "incentives" have to be "closely related" to the performance of executives and must be linked to the achievement of the banks' business plans.

Previously, all incentive payments were explicitly banned. This ban could stay in place until mid-2013, under the terms of last year's bank recapitalisations, sources said.

But the latest document establishes, at least in principle, that bailed-out banks can pay bonuses to their directors and senior executives while the banks are still dependent on the State.

"The minister will require that any incentive agreements for directors and senior executives are closely related to their performance, measured by the achievement of relevant targets -- such targets having regard to the achievement of the business plan," the new guidelines for AIB, IL&P and IBRC say.

Bank of Ireland is not covered by the latest instalment since it is only 15pc owned by the State, and the Government will not monitor its activities as closely as the other banks'.

BOI is banned from paying bonuses until June 2013, the Irish Independent understands.

A spokesman for the Department of Finance last night insisted there had been "no change" in its policy on bonuses, and stressed that the new "relationships frameworks" with the banks did not override existing agreements with banks that "prohibit" bonuses.

He refused to disclose details of those agreements or reveal how for long bonuses are prohibited. And he failed to explain why details about the conditions for incentive payments are included in the relationship frameworks if it is never foreseen that the banks would be allowed to pay bonuses.

Irish Bank Resolution Corporation (formerly Anglo Irish Bank) last night said it "does not currently operate incentive arrangements and there are no plans for such arrangements". Irish Life & Permanent also said it had "no plans" to propose incentive schemes.

AIB and BoI declined to comment, but last year BoI told shareholders it expected to be prohibited from offering bonuses until June 2013.

Future bonuses are likely to be well below the multi-million euro windfalls enjoyed by banking bosses in the past, but any payments would come on top of hefty salaries.

IBRC chief executive Mike Aynsley got a total package of €866,000 last year. His bank's annual report shows its 10 top managers, including Mr Aynsley, shared "salaries and short term benefits" of €6m in 2011 -- implying average payments of well over €500,000.

AIB chief executive David Duffy is on a basic salary of €500,000, plus pension contribution of €125,000, while Bank of Ireland boss Richie Boucher got a salary of €623,000 last year, plus pension of €174,000 and other payments of €34,000.

The Fianna Fail government at one point considered plans to introduce a 90pc 'bankers bonus' tax when it appeared that AIB would have to push ahead with a €40m bonus payment that was ultimately blocked by the late Finance Minister Brian Lenihan.

Irish Independent