Banking Inquiry: Central Bank had ‘no plan’ for Anglo default

Former governor of Bank of Ireland Richard Burrows has said the Central Bank had no plan in place if Anglo Irish Bank was to default.

Mr Burrows, appearing before the Oireachtas Bnking Inquiry , said he had met former chairman of Anglo Seán Fitzpatrick on September 28th, 2008.

He said Mr Fitzpatrick made a case for BoI to take over Anglo or consider buying a part of the bank.

“They were looking for any assistance we could offer,” he said.

After the meeting, Mr Burrows met the then Central Bank governor John Hurley at a pre-arranged meeting.

“I explained my concern at the difficult position that could result from the default of Anglo and I asked if there was a plan in place to deal with this situation,” Mr Burrows said.

“I was surprised to learn that there was not.”

Mr Burrows then met his chief executive Brian Goggin and suggested a meeting with Government. He then contacted Dermot Gleeson, chairman of Allied Irish Bank, to ask him to attend.

“I led on behalf of the four of us to explain to the Taoiseach. The reason for seeking a meeting was to make sure the Government was fully aware of the severity of the situation, that Anglo could fold the following morning and the impact it could have on the banking system at large.”

Mr Burrows said the banks did not go in with a solution to propose but to make Government aware of the seriousness. He said there was a conversation about nationalising Anglo but the Government ruled it out.

Mr Burrows confirmed he and Mr Goggin knew a blanket guarantee of the six institutions would be put in place on the night in question.

He said there was no conversation at all on the night about covering subordinated debt in the guarantee.

Blanket guarantee

Mr Burrows also said the Government could have avoided a blanket guarantee if it accepted the € 5 billion from Bank of Ireland and Allied Irish Bank.

Mr Goggin, who was in Government Buildings on night of guarantee, said he could not say whether the decision made on September 29th was the right one.

In his opening statement, he said: "I would say, that, in my view, the immediate funding requirements of Anglo Irish Bank could have been dealt by a guarantee of the financial support which Bank of Ireland and AIB were prepared to make available in the short term to Anglo Irish Bank (subject to that funding being guaranteed by the Government). Such a decision may have given the Government more time to consider its options.

“However the Government chose to guarantee all financial institutions presumably to address the risk that a more limited form of guarantee could have led to a run on Irish banks.”

BoI and AIB had been asked to provide € 5 billion each to rescue Anglo Irish Bank from collapsing. Mr Burrows said he was not aware of the range of options available to the Government.

He said the then taoiseach Brian Cowen and former minister for finance Brian Lenihan were in an "extraordinarily difficult position" when it became clear Anglo was at risk of collapse.

Mr Burrows said Bank of Ireland was solvent on the night of the guarantee and had “60 days of visibility”.

He said they had liquidity concerns but insisted it was solvent.

Mr Burrows said he was aware on the night in question there would be a Cabinet meeting later in the night.

Mr Burrows also contradicted evidence given by Mr Goggin, who previously told the inquiry Bank of Ireland asked for subordinated debt to be covered by the guarantee.

Mr Burrows said that simply had not happened and a discussion surrounding the parameters of the inquiry took place the following day.

Mr Burrows said the guarantee was necessary but he took issue with the timing.

He had concerns about whether more time should have been taken to consider all other options.

He said discussions began with former Taoiseach Brian Cowen about recapitalisation of Bank of Ireland in late autumn of 2008.

Apology

Mr Burrows said he accepts accountability and responsibility for the position the bank was in in 2008 and expressed “deep regret” for that.

Mr Burrows was asked about warnings from Professor Morgan Kelly, who predicted the economic crash.

He said he had read the articles that had an “interesting angle” but the bank had chosen to listen to the flurry of opinion pointing in a different direction.

The former governor said: “We should have pay more attention, we took the opinion of other experts and we decided that is what we would listen to.”

Asked by Labour Senator Susan O’Keeffe should he apologise, Mr Burrows said: “I was very clear at the time that I had apologised very comprehensively to shareholders, to people within Bank of Ireland and to the Irish taxpayer.

“I put on record our appreciation at what Government had done.”

Also appearing at the inquiry, former governor of Bank of Ireland Laurence Crowley said he believes "the structure that was in place during BoI reflected best practice".

Mr Crowley said internal controls to identify, manage and control risk were “appropriate”.

He said property lending did not grow disproportionately in the bank in comparison to others.

During his time at the institution, Mr Crowley told the inquiry th bank’s strategy was not reliant on such lending. He said he had no reason to believe it was reckless lending.

Mr Crowley said he always acted on good faith and best interests of the company .

He said all directors acted in the best of their ability but insisted when he left in 2005, the institution was in good shape.

If he did anything to add or assist the economic crash, Mr Crowley said that is something of deep regret for him.