Ireland tells Allied Irish Banks to obey salary cap

* Govt turns down request to exceed 500,000 euro pay cap

* Allied Irish in search of new executive

DUBLIN, Nov 17 (Reuters) - Ireland's finance minister turned down a request from Allied Irish Banks (ALBK.I) to exceed an executive salary cap imposed under a state rescue scheme earlier this year.

Allied Irish Chief Executive Eugene Sheey said in April he would retire as soon as a successor was found and the bank is now set to name board member Colm Doherty as managing director, with Chairman Dan O'Connor taking on executive duties.

The Irish Times, citing sources with knowledge of the bank's plans, said on Tuesday the bank wanted to pay Doherty 633,000 euros ($943,000), above the government's cap of 500,000 euros.

Finance Minister Brian Lenihan gave no detail on Doherty's case but said he had received a proposal by Allied Irish to exceed the salary limit for one of its executives and the request had been rejected at a cabinet meeting on Tuesday.

"I can tell you that the government are not willing to break with the established guideline in this case," Lenihan told RTE radio.

The government, which holds indirect 25 percent stakes in Allied Irish and in rival Bank of Ireland (BKIR.I) after a bailout, has imposed a cap on bankers' salaries as it grappled with twin fiscal and banking crises.

"We have an adjustment to make as a country and banks have to be part of that adjustment," Lenihan added.

Lenihan, who said last week Allied Irish would get an "internal management team", acknowledged the salary cap had been a reason why some external candidates had turned the job down.

Rival Bank of Ireland (BKIR.I), which like Allied has received a 3.5 billion euro state bailout, was widely criticised earlier this year for choosing a new CEO from among its own ranks instead of bringing in a fresh face. (Reporting by Antonella Ciancio; Editing by Andras Gergely and David Holmes) ($1=.6712 Euro)