Bank told Government it would not require external capital

ANGLO CLAIMS:ANGLO IRISH Bank, whose rescue could cost taxpayers €25 billion, told the Government that it needed no external capital just days before advisers found it was facing a possible €100 million deficit in September 2008.

Documents released by the Dáil’s Public Accounts Committee show that Anglo gave a presentation to Government on September 18th claiming that its financial situation was sound, and stating that it had “no requirement for external equity capital”.

A week later advisers from Merrill Lynch warned the Government that Anglo could have a €100 million shortfall within four days, September 30th, and €4.9 billion by October 24th.

Merrill Lynch, which the Government hired as an adviser just days before guaranteeing the liabilities of six Irish banks in September 2008, said Anglo and Irish Nationwide Building Society had problems accessing funds from global markets. Merrill noted that Anglo in particular was losing deposits, as nervous corporate customers withdrew their cash.

At the same time, it could not get short-term funding from overseas financial institutions, as they believed lending to the Irish bank was too risky.

The advisers suggested that the State take over Anglo or place it in some kind of “protective custody”.

Another document shows that days before the blanket guarantee was announced, accountancy firm, PricewaterhouseCoopers (PwC), told the Government €13 billion of Anglo’s loans were secured against land in various stages of development.

Of that, €700 million was secured on undeveloped land with no zoning or planning permission, €4.5 billion against zoned land with no planning, and €3 billion against property with zoning and planning. Another €55 billion was secured against various assets that were generating income. PwC said that with the exception of €2.2 billion worth of debts, it would be difficult for Anglo to convert these loans to useful collateral.

The Government included Anglo in the guarantee given on liabilities of six Irish banks, which covered deposits and debts owed to overseas banks. The move meant that the ultimate liability for these debts rested with the taxpayer and limited the State’s own scope to borrow money.