Ireland's cabinet is poised to allow domestic banks to pay bonuses of up to 20,000 euros ($20,758) and benefits such as healthcare for the first time since the 2008 global financial crisis, a source close to the matter said on Tuesday.

Executive pay was capped by Ireland at 500,000 euros a year after the crisis that resulted in the euro zone's costliest bank sector bailout. Dublin also banned all variable pay and fringe benefits for even junior staff in restrictions that lenders say hampers efforts to attract and retain talent.

Finance Minister Paschal Donohoe, who began an independent review of Ireland's retail banking system a year ago, will ask colleagues to accept its recommendations at a cabinet meeting on Tuesday, the source said.

The recommendations include a lifting of the 500,000 euro pay cap for Bank of Ireland, the country's largest bank by assets, which returned to full private ownership this year.

The review also recommends that the cap should end for the country's other two retail banks - AIB and Permanent TSB - when the state's shareholding reaches an "appropriate" level, the source said.

The government owns 57% of AIB after recent share sales and 63% of Permanent TSB.

Details of the recommendations were first reported by the Irish Times. ($1 = 0.9635 euros) (Reporting by Padraic Halpin Editing by David Goodman)