Regulator raises concern over discrepancies in Anglo reports

THE FINANCIAL Regulator has raised concerns with senior management at the State-owned Anglo Irish Bank over discrepancies in the reporting of regular information by the bank.

It is understood that officials in the division of the regulator, which monitors the domestic banks, have raised their concerns with Mike Aynsley, the Australian banker who took over as chief executive of the bank last month. Regulatory officials have noted that different sections of the bank have submitted contradicting reports over recent weeks.

As a result of queries raised by the regulator, the bank is conducting a review of its operations in an attempt to improve the quality of its reporting, particularly in relation to treasury assets such as investments held by the bank in bonds and other types of liquidity instruments.

It is understood that the discrepancies have arisen as a result of the quality of the reporting and information systems that have been in place at the bank for some time. A spokeswoman for the bank declined to comment.

A source close to the bank said Anglo was assessing ways of “enhancing the depth and detail of their reporting capability” and that Mr Aynsley was particularly concerned about improving information systems in several areas.

A spokesman for the regulator declined to comment specifically on reports being filed by Anglo.

“We are very actively monitoring the domestic credit institutions through our on-site teams, various reporting mechanisms and through other direct engagements with the firms. Where we have any issues or concerns . . . this is done at the highest levels,” he said.

Mr Aynsley has indicated that Anglo needs to address the insufficient investment in the bank’s information systems and the technology supporting the reports that the lender submits to the regulator. Regulatory officials have stressed that the bank needs to improve the quality of its reporting systems and to ensure that they can cope with providing information in the format demanded by the regulator.

The domestic credit institutions department within the regulator, which was originally part of the banking supervision department, is pressing for changes to be introduced by Anglo as quickly as possible.

Anglo had “available-for-sale financial assets” worth €7.76 billion at the end of the half-year to March 31st last, down from €8.1 billion six months earlier. The bank took an impairment charge of €141 million on its treasury assets in the six-month period due to the deterioration in capital markets and weakening economic conditions.

This compared with a bad debt charge of €155 million for the bank’s financial year to September 30th, 2008.

Asset-backed securities indirectly linked to the US subprime market accounted for €70 million of the charge. Some €6.4 billion, or 83 per cent of the bank’s treasury assets at the end of March, were assigned an AA credit rating or better.