Anglo board considered wind-down of bank - chairman

ANGLO IRISH Bank chairman Donal O’Connor has said the board of the lender considered an “orderly wind-down” of the bank.

But it later concluded that this would lead to a significant withdrawal from funding of €50 billion at the bank, leaving the taxpayer with a large bill.

Speaking at the Oireachtas Joint Committee on Finance and the Public Service, Mr O’Connor said the board had been instructed by Minister for Finance Brian Lenihan to continue to run the lender as a going concern in an attempt to maximise the recovery of the bank’s loans.

About 75 per cent of Anglo’s funding comes from outside the State, Mr O’Connor said. And the bank had been advised that a significant part of this would be withdrawn if Anglo was wound down immediately or on an orderly basis, and the State would have to step in to cover the lost deposits.

“If the market sees that we would be in a wind-down situation – if that’s what it is, albeit orderly – we would lose a significant amount of that international funding,” said Mr O’Connor.

He said that stabilising and “de-risking” Anglo was a “challenge” and “difficult”, and that the board was “very concerned” about this, but that continuing to run the bank as a going concern was “in the best interest of the State”.

Mr O’Connor said this would give Anglo the widest range of options to protect the taxpayer.

The options included attracting outside investment into the bank, the sale of parts or all of the bank, or the merger or consolidation of the bank into a wider, more diverse banking group, he said.

The bank would also consider selling some of its loan book “at the right price”, he said, and that some interest had been expressed in the €10.3 billion US loan book.

He said Anglo was “not as resilient” as other banks following the collapse of the property sector.

He revealed that a number of staff still in management positions had impaired loans, but Anglo would be “resolute” in pursuing all customers to recover loans.

Labour finance spokeswoman Joan Burton criticised the culture that grew within Anglo, saying that senior managers were not only lenders but became “players in the property bubble”.

Anglo reported a loss of €4.1 billion in the half-year to March on loan losses of €4.9 billion.

The Government has so far pledged to invest €4 billion into Anglo to protect against losses rising to €7.5 billion, but Mr O’Connor said more capital may be needed.

He said the bank could still post a further €1.5 billion to €3.5 billion in losses even after the State’s “bad bank”, the National Asset Management Agency (Nama), buys development and associated loans from the bank.

Mr O’Connor said the potential losses of €7.5 billion were based on declines of up to 70 per cent on the value of development land.

Senator Shane Ross said the increase on loans that were not being repaid, from €2.5 billion last September to €23.6 billion in March, showed the older figures were “pure fantasy” and that Mr O’Connor was partly responsible as he was on the board at the time.

Mr O’Connor said the situation became “very much worse”.

Mr Ross queried why Mr O’Connor, who was appointed a non-executive director of Anglo in June 2008, did not resign with the rest of the non-executive directors following Anglo’s nationalisation.

Mr O’Connor responded that he had been asked to stay on the board by the Minister for Finance.