Desmond criticises Bank of Ireland over Boucher
BUSINESSMAN DERMOT Desmond has criticised the appointment of an internal candidate as the new chief executive of the Bank of Ireland.
He has been invited to meet the governor of the bank, Richard Burrows, to discuss his concerns about the appointment of Richie Boucher.
Mr Desmond, who is a substantial shareholder in the bank, has already discussed the matter with Mr Burrows and other members of the bank’s board, or court.
Earlier this week he sent a letter to Mr Burrows expressing his “dismay” at the appointment.
“Before I decide on my next move, I would like to clarify whether Mr Boucher had a major involvement in the bank’s exposure to property lending,” Mr Desmond said in the letter, which has been seen by The Irish Times.
He said Mr Boucher was one of the most senior bankers in the organisation, as a director, chief executive of retail financial services, a member of the group risk policy committee and of the group investment committee.
“Therefore [he] must have been responsible for fatal errors of judgment, including advancing loans to developers on the strength of overstated land values and insufficient security.
“Customer loans and advances were €68 billion as at March 2004. By September 2008, the advances had more than doubled to €145 billion, of which €38 billion represented loans to property and construction.
“There has to be a direct correlation between Mr Boucher’s appointment to these senior positions and the excess lending policies of the bank.
“How did Mr Boucher and others within the bank view the warnings of the Central Bank in 2004 concerning the overheated residential property market?”
Mr Desmond said the appointment of Mr Boucher sent out “completely and utterly the wrong message. People who invested their pensions and savings in Bank of Ireland shares have been put under extreme financial pressure through absolutely no fault of their own. People are quite rightly angry.
“Credibility and confidence need to be restored. This will not be achieved by promoting existing management further up the chain.
“A clean break is needed. The people who got the bank into the mess are not the people to get the bank out of the mess.”
Mr Desmond said the bank’s directors were obviously seriously out of touch with market perception and the sentiments of shareholders, accountholders and the market generally if they thought otherwise.
He said he had nothing personal against Mr Boucher but perception was important if public confidence and the external reputation of the Irish banking system were to be restored.
“It may have been difficult to line up a strong external or internal candidate.
“However, the right thing to do was to ask someone of the calibre of Maurice Keane or Pat Molloy to preside over the running of the bank for a transition period of, say, 18 months, while a suitable candidate was identified and approached,” Mr Desmond said.
He said he believed his views reflected those of shareholders generally and other affected parties. Mr Desmond copied his letter to the bank’s directors.
A spokesman for the bank said Mr Desmond was a substantial shareholder in the bank. Mr Burrows “has responded to Mr Desmond offering him a meeting at which his points can be addressed”.
“Richie Boucher was the unanimous choice of the board as having the required banking and leadership experience, after an exhaustive process in Ireland and internationally, involving internal and external candidates.”
Bank of Ireland shares fell 30 per cent yesterday on the stock exchange, ending the day at 12.5 cent.
Twelve months ago the share price was €9.15. Financial stocks around the world fell further yesterday.