PAY for bank directors will have to increase if the Financial Regulator introduces tough new rules on corporate governance, an Ibec-backed lobby group has warned.

Financial Services Ireland (FSI), which represents 180 financial institutions and is chaired by EBS chief executive Fergus Murphy, made the claims in a response to the regulator's consultation paper on corporate governance reforms.

FSI said the proposal in the paper to put a limit of three on the number of bank directorships a person can hold would lead to pay increases and result in a lack of experienced people on the boards on smaller institutions.

"To place a restriction of only three... would render [non-executive directors] even more difficult to find, and increase their remuneration substantially," FSI said in the submission.

"There are a limited number of qualified individuals in the country with relevant experience. By reducing the number of directorships an individual may hold, the cost for the company increases, and the director himself becomes more dependent on that company."

The regulator, Matthew Elderfield, proposes changes to ensure that a bank chief executive doesn't become chairman.

It is also proposed to increase the number of board meetings, and to encourage non-executive directors to play a bigger role at board level.