The author of this morning's report, Brendan Keenan, says Honohan made his comments on Monday, before the row broke out.

In it, he said attention would have to shift from salary caps to the bonuses paid to top executives to ensure they did not encourage risky behaviour.

He said he recognised public concern about high salaries, but added the important thing was to ensure that such payments did not encourage bankers to make risky loans.

"The focus in other countries is already on reducing the payment of short-term bonuses, before the consequences of executive decisions become clear. We have to try to align the incentives for chief executives of banks with the common good of the community," he said.

"The minister has discretion on the payment ceiling. I don't think he will adopt a dog-in-the-manger attitude." The governor also promised to get tough on bankers. "We must enforce both the rules that are there, and the principles which have been laid down. I am prepared to take court action, especially if some past behaviours re-appear," he said. Separately, the Irish Independent reports this morning that the half-million-euro cap on top bankers' pay does not include the value of their pension contributions. On top of his basic 500,000 euro salary, it says that Bank of Ireland chief executive Richie Boucher is also entitled to a 220,000 euro pension contribution from the bank, but has voluntarily agreed to reduce this to 123,000 euro. When asked whether Mr Doherty's pension would bring his package above 500,000 euro , an AIB spokesperson told the paper that the cap was on salary and that his remuneration was "fully compliant with terms agreed with the Department of Finance". Finance minister Brian Lenihan last night attempted to play down talks of a rift between the government and AIB, insisting that relations were "okay now".