Anglo's own auditor aware of FitzPatrick loans

THE ANGLO Irish Bank executive responsible for managing internal risks knew that its former chairman, Seán FitzPatrick, owed the financial institution money.

Mr Fitzpatrick resigned in December when it emerged that he effectively hid details of an €84 million debt to the bank from shareholders. He temporarily repaid the cash with loans from Irish Nationwide before the bank’s balance sheet date in September, and subsequently drew down the money again from Anglo.

The “refinancing” allowed him to disguise the extent of his liability, as he was only obliged to declare the precise amount he owed on the balance sheet date.

Yesterday, Anglo’s internal auditor Walter Tyrell told the Joint Oireachtas Committee on Economic Regulatoary Affairs, that he was “aware that Mr FitzPatrick would have had loans that were approved by the credit committee”.

He stressed that his role was to ensure that all loans, including those given to directors, were approved and monitored in accordance with the bank’s credit risk policy. In 2007, Mr FitzPatrick owed Anglo €129 million, but only declared €7 million.

Earlier, Mr Tyrell told the committee that he did not find out the extent of the loans until late last November, shortly before Mr FitzPatrick resigned. His activities were a factor in the Government’s decision to nationalise Anglo.

Separately, there was no decisive move yesterday on the long-awaited package to recapitalise Allied Irish Bank and Bank of Ireland. Although expectation built up over the weekend that the Government would include recapitalisation alongside measures to stabilise the public finances, it became clear in advance of the statement by Taoiseach Brian Cowen that an announcement on that front was not imminent. Some financial sources said yesterday that the banks were again seeking clarification from the Government as to whether it will extend the two-year State guarantee on their liabilities, which is due to lapse in September next year.

Sources with knowledge of the process also said there was still no final agreement on the terms of any scheme to insure banks against losses on their development loans. Nor is there any agreement on whether to proceed with a “bad bank” plan.

It is understood the banks favour the insurance option as such a plan would enable them to avoid immediate writedowns on the development loan books.

The Government, however, does not want to be seen to providing a cushion to banks against unreasonable risks taken.

Speaking at the joint committee yesterday, former Revenue chairman Frank Daly who took over the chair of the Anglo board’s audit committee last month, said that Mr FitzPatrick’s practice of borrowing and “refinancing” the loans from Anglo was unique.

He said that members of the bank’s credit committee would have approved the amount of credit available to Mr FitzPatrick, but did not know he disguised his liability. “It happened and we are trying to find out how it happened to make sure that it does not happen again,” Mr Daly said.