Regulator may have known of loans to FitzPatrick for eight years

Sat, Jan 24, 2009, 00:00

INFORMATION CONCERNING the extent of the loans taken out from Anglo Irish Bank by its former chairman, Seán FitzPatrick, appears to have been known by the financial regulator’s office for the past eight years.

A spokesman for the regulator would not confirm that quarterly reports detailing directors’ loans from the bank and filed to the regulator’s banking supervision section by the bank, contained details of the loans.

A spokesman for the bank would also not comment, citing the range of inquiries currently under way into the matter.

However, a number of sources have indicated that Mr FitzPatrick’s loans were disclosed in the quarterly reports. It would seem the discrepancy between what was disclosed in the quarterly reports and what was declared in Anglo’s year-end accounts was not picked up within the regulator’s office or, if it was, nothing was done about the matter until late last year.

Mr FitzPatrick had loans of up to €129 million from the bank, but had a practice of switching the loans to Irish Nationwide at near to year’s end each year, so that the figure that appeared for directors’ loans in the bank’s year end accounts was a much lower figure. The loans were then returned to Anglo’s books.

Banking directors are obliged to reveal the full extent of their loans from their institution at the end of each quarter so the regulator’s office can be satisfied they do not breach a rule that restricts loans to an individual director to 2 per cent of a bank’s capital.

The capital of Anglo Irish Bank at the end of its last financial year was approximately €5 billion. The quarterly reports would have revealed to the financial regulator’s office the size of the loans Mr FitzPatrick had from his bank. They were far in excess of all other Irish bank directors’ loans.

In comments to the Oireachtas Joint Committee on Regulatory Affairs earlier this month, Jim Farrell, chairman of the regulator’s office, said the issue of directors’ loans at Anglo was first noticed on foot of a report for the quarter to the end of September 2007.

“It came into the financial regulator and there was a period for processing, examination and pulling data together. This found its way to the examiner dealing with the issue of Irish Nationwide, who spotted the transaction because it was listed in the top 30 exposures.”

However, the matter was not pursued. It arose again when Minister for Finance Brian Lenihan raised queries about directors’ loans at Anglo Irish late last year.

An internal inquiry in the regulator’s office investigated when the former chief executive of the regulator’s office, Patrick Neary, was first informed of the loans.

“There is no suggestion from any party that any communication – verbal or written – on this issue was made to either the prudential director [Con Horan] or chief executive in the period [subsequent to January] to December 2008,” the report stated. When Mr Neary resigned earlier this month, he said: “So far as I am concerned, I was not advised of any such matters in early 2008 and there has been no oral, written or e-mail escalation of these issues to me, or to the authority, over the period until the matter was raised with me by the Minister on 10th December, 2008.”