Documents reveal tensions between IBRC and Department of Finance

The extent of the breakdown in the relationship between Minister for Finance Michael Noonan and his officials on one side and the chairman and chief executive of IBRC on the other is clear from documents released to The Irish Times.

Tensions during 2012 went well beyond the sale of Siteserv, also involving other asset sales, appointments at IBRC, its relationship with some big borrowers and the amount its senior executives were paid.

Tensions came to a head in a meeting on July 25th,2012, minutes of which were among the documents released under the Freedom of Information Act. Mr Noonan told IBRC chairman Alan Dukes and chief executive Mike Aynsley that he was “ very uneasy” with the relationship between the department and the IBRC and that his “confidence was wearing quite thin at this stage”.

In the minutes, the Minister is quoted as saying he is “not confident at present that the relationship is sufficiently secure to maintain my confidence in reporting to the Dáil”.

Bank’s actions

The minutes show an interchange in which Mr Dukes and Mr Aynsley strongly defend the bank’s actions, with Mr Dukes pointing out it operated in a sensitive area where controversies were bound to arise. Mr Aynsley said communication channels between the department and the bank were not operating as they should and the bank kept getting “torpedoed” at meetings. The meeting was the culmination of three or four months when tensions between the two sides appeared to build.

Among the contentious issues was the appointment of a chief financial officer at the bank, made – the department says – without clearance. IBRC argued it had applied for sanction and got no reply before deciding to go ahead.

In a briefing note ahead of a meeting of department officials with Mr Dukes and Mr Aynsley on May 31st, the unnamed civil servant writes: “This is a typical example of the type of behaviour that undermines the trust between the department and the bank.” Later minutes make clear the concerns related to the way the appointment was made and not the individual involved.

The documents also reveal departmental unease with the handling of other sales, apart from Siteserv.

Raised concerns

These include the sale of the Arthrop Building in New York, a landmark Manhattan residential building. Anglo Irish Bank had funded the purchase and renovation of the building to the tune of €273 million. A senior official had raised concerns about the valuation process and the provisioning made by the IBRC on the sale of the loan.

The department also raised concerns about UK court hearings which referred to text messages sent by Mr Aynsley to developer Paddy McKillen. Mr Aynsley responded that this was the way Mr McKillen communicated and he “maintained an appropriate position throughout”.

Mr Aynsley told the July 25th meeting that relationships with borrowers “must be close but that they are not inappropriate”.

Clients are managed to ensure a maximum return on loans, he said. The minutes state Mr Aynsley confirming that the relationship with two of the bigger borrowers, Mr McKillen and Denis O’Brien “are strong but not inappropriate and that he may have had about four dinners/lunches with both individuals”.