Analysis: PwC report should have questioned Anglo data

The data emerging from PwC’s examination of Ireland’s banks in 2008 adds to the image of bust lenders sliding from danger zone to disaster: disaster for themselves, their customers, their shareholders and, worst of all, for the taxpayers left with the €64 billion bill for their folly.

PwC established that the banks had lent a grand total of €25.6 billion to their top 22 borrowers, most of them primarily engaged in property development. Moreover, PwC found the banks’ land and development loans totalled no less than €63 billion.

Maximum loss

In spite of the risk presented by these and a legion of other vulnerabilities, the

Sunday Business Post

report on PwC’s analysis says the maximum estimated loss in a worst case scenario was €10.6 billion.

Then taoiseach Brian Cowen told the Dáil on November 19th, 2008, that capital levels in the guaranteed banks would remain above regulatory levels in the period to 2011.

This was the case when taking account of “a number of stress scenarios.” Wrong.

The guarantee would cripple the State, putting present and future generations of taxpayers on the hook for losses that could not be sustained without emergency loans from international lenders. It is as well to recall that the eventual bank bailout bill amounted to twice the State’s total tax revenue in 2010, the worst year of the debacle when tax collection dropped to €31.75 billion.

Citing commercial sensitivity, Cowen did not reveal details from the report that day in the Dáil. Yet there were plenty of grounds for reasonable suspicion. It appears PwC did not believe interest roll-up data from Anglo Irish Bank, which should, in the circumstances, have raised questions over the credibility of other Anglo data. PwC also found certain big-time borrowers to have “difficulties” or “severe cash difficulties”.