AIB preferred candidate blocked by Central Bank

THE CENTRAL Bank blocked Allied Irish Banks’ preferred candidate for the job of chief risk officer last year as the person had worked at the lender previously and regulatory staff felt the individual was not right for the key role.

It was one of the first senior appointments at an Irish financial institution to be blocked by the regulatory team at the Central Bank.

Soon after taking over the running of the bank in November 2009, AIB’s then managing director Colm Doherty appointed international headhunters Egon Zehnder to find a candidate to fill the role of chief risk officer. The position had been vacant since May 2009 when Nick Treble was appointed head of AIB’s division in Britain and Northern Ireland.

The Irish candidate chosen following the selection process had worked in AIB about 10 years previously and was working in the public sector when approached by the bank.

When senior regulatory staff declined to sign off on the appointment, AIB started the recruitment process again. The original candidate withdrew from the process.

Neither the bank nor the regulator would comment.

The role is regarded as a key position given the problems that the bank has had with its loan book. Losses on property loans have forced the bank to accept €7.2 billion in Government capital, pushing it into 93 per cent State ownership and effective nationalisation. The bank is expected to require several billion euro more in funding following the Central Bank’s new stress tests on Thursday.

AIB and the regulator had been locked in protracted and tough discussions on the appointment of a chief risk officer last year and the criteria AIB applied to select a candidate.

AIB appointed outside consultant Mary Phibbs as a temporary chief risk officer for a six-month period last October. Ms Phibbs was retained from US firm Alvarez and Marsal, which specialises in restructuring financial companies.

The firm is the liquidator of the holding company of failed US bank Lehman Brothers.

Ms Phibbs has worked in Australia and the UK and has more than 30 years’ experience in banking.

The bank is still searching for a permanent chief risk officer.

A report on AIB by consultancy firm Promontory Financial Group – commissioned by the Central Bank – last January found the bank’s most pressing needs were the appointments of a chief executive and a chief risk officer.

The role of chief risk officer or “head of risk” is one of a range of top banking jobs that will fall under the Central Bank’s strict new fitness and probity regulations set to come into effect in September.

The Central Bank published a consultation paper on the regulations last week.