Drumm resigns as chief executive of Anglo Irish

Seán FitzPatrick, then group chief executive of Anglo Irish Bank, speaking at a presentation of the bank's preliminary results. Photograph: Eric Luke

The chief executive of Anglo Irish bank David Drumm has resigned. The new chairman Donal O’Connor - who was appointed following the resignation of Sean FitzPatrick last night - said Mr Drumm would continue to work with the bank until a new CEO is appointed.

Mr Drumm said it was “undoubtedly in the best interests of Anglo that a new chief executive is appointed” and that his decision was appropriate following the resignation of Mr FitzPatrick.

“It is appropriate for me to step down today given last evening’s announcement in relation to the resignation of Sean FitzPatrick and given the strong statement of support for the Bank and its recapitalisation programme by the Minister for Finance.”

He said progress was being made on recapitalisation programme and that the appointment of a new chairman and chief executive would give the bank “fresh impetus”.

The bank's shares fell sharply on the news before recovering at the close of trading to end up over 9 per cent at 35 cent  in Dublin giving the bank a market value of €265 million. Shares in the bank had fallen by almost 40 per cent in early trade this morning to 19 cent.

Mr FitzPatrick stepped down after it emerged he had temporarily transferred €87 million in loans with Anglo to another bank before the group's September 30th year-end. It is understood the loans were transferred to Irish Nationwide.

These transfers took place over eight years and were used to avoid disclosing the loans to shareholders. Mr FitzPatrick has also resigned as a on-executive director from the board of Greencore and as chairman of Smurfit Kappa Group with immediate effect.

Anglo Irish Bank is reviewing its policy regarding directors’ loans following the resignation of Mr FitzPatrick.

The Financial Regulator is still examining the loans issued by Anglo Irish Bank to its directors, including Mr FitzPatrick. The Regulator said it was made aware of the loans “following an inspection earlier this year”.

The Chartered Accountants Regulatory Board (CARB) has also launched an investigation into the "circumstances around the issue of inappropriate directors' loans at Anglo Irish" and the role played by any Institute of Chartered Accountants members.

The Irish Association of Investment Managers said it was "surprised and disappointed" at the circumstances which had led to the resignations and said it would be writing to the new chairman to outline its concerns.

In a statement this morning Anglo Irish said the board has started a review of governance “including policy and practice relating to the directors loans”. The review will be carried out using “independent expertise”, the bank said.

Non-executive director Lar Bradshaw has also resigned. Mr Bradshaw had jointly held a loan with Mr FitzPatrick, which was temporarily transferred to another bank.

In a statement last night, Mr FitzPatrick said: "The transfer of the loans between banks did not in any way breach banking or legal regulations. However, it is clear to me, on reflection, that it was inappropriate and unacceptable from a transparency point of view.

"One of the loans was a joint loan with Lar Bradshaw and I would like to emphasise that he had no knowledge of the temporary transfer of this loan."

Anglo Irish said this morning that “all of the other directors have confirmed that they have not engaged in this or in any other inappropriate action in relation to their loans”.

It said all directors' loans have been agreed on “normal commercial terms and conditions”. Anglo's non-executive director Donal O'Connor has succeeded Mr FitzPatrick as chairman.

This morning Mr O’Connor said the board was “determined to do what is right” and would consider all recommendations emerging from the review to ensure the governance process at the bank “is of the very highest standard”.

Mr O'Connor added the bank remained in close contact with the Financial Regulator and the Department of Finance.

In its statement last night Anglo Irish said Mr FitzPatrick's decision to resign was "based on the fact that, over a period of eight years to 2007, he temporarily transferred loans with Anglo Irish Bank to another bank prior to the group's year-end.

"This transfer of loans did not breach banking or legal regulations. It was, however, inappropriate from a transparency point of view."

Anglo said all of its other directors had confirmed they had "not engaged in this or in any other inappropriate action in relation to their loans".

Minister for Finance Brian Lenihan last night reiterated his "commitment to underwrite the capital needs of Anglo Irish Bank on appropriate terms".

He said Mr FitzPatrick’s resignation would not interrupt the recapitalisation programme announced last Sunday and said his focus was to ensure the “long-term strength and viability” of Anglo Irish Bank as it has “systemic importance in Ireland”.

Mr Lenihan said discussions in relation to Anglo-Irish's involvement in the State's recapitalisation programme were “already far advance” and expects “details of these discussion can be announced very shortly”.

As part of the Government’s guarantee scheme former Minister for Finance Alan Dukes, and former Chairman of the Revenue Commissioners Frank Daly have been appointed as non-executive Directors to Anglo Irish Bank.

The impact of Mr FitzPatrick declaring his total loans of €87 million brought the overall loans to directors at Anglo Irish to €150 million as of September 30th 2008. The equivalent figure for 2007 was €41 million.