Appointment of former chief executive signals a reversal

ANALYSIS:THERE WAS a reversal yesterday at Bank of Ireland and the Department of Finance as Pat Molloy, a former chief executive of the bank, was confirmed as its next governor (chairman), but not at the Government's direction.

Molloy’s name emerged on Tuesday night as the bank’s replacement for Richard Burrows, who stepped down after the bank reported a loss of €7 million for the year to March 31st, 2009.

The department said that evening that Minister for Finance Brian Lenihan would meet the bank yesterday to discuss the appointment of a Government-nominated director, Molloy, as governor of the court (board) of the bank.

Under the terms of the €3.5 billion recapitalisation of the bank by the State, the National Pension Reserve Fund Commission, which is providing the recapitalisation funds, can appoint a further two directors in exchange for the 25 per cent preference share investment and warrants in the bank.

Two directors, Tom Considine and Joe Walsh, have already been appointed by the Government under the bank guarantee scheme.

When the bank met the Minister yesterday, it is understood that he said he did not want a Government-nominated director to be appointed to the role of governor, and so decided to allow Molloy’s name to go forward as a bank appointment rather than a joint appointment.

It is understood the Minister was keen to demonstrate that a 25 per cent shareholder in the bank, ie the Government, would not be seen to be calling the shots and appointing the chairman of the bank’s board.

Molloy’s appointment as governor was approved by the court at a meeting on Monday.

However, his name was on two lists – top of the bank’s shortlist to become governor to replace Burrows, and on the Minister’s list to become a Government- appointed director.

It is not clear if the bank or the Minister knew in advance that Molloy’s name was on either list.

Regardless, Molloy will take over from Burrows after he chairs the bank’s annual general court (meeting) on July 3rd and the Minister will go back to a shortlist to chose two more directors to appoint to the court of the bank to represent the taxpayers’ interests.

Molloy, an experienced banker, comes with a strong track record and is held in high regard following his time as Bank of Ireland chief executive from 1991 to 1998 when he resurrected the bank after a disastrous investment in US bank First New Hampshire Bank and heavy property losses in the UK.

Although the bank has chosen an individual who was one of their own, he last sat on the court of the bank in 2001 as a non-executive.

Molloy predates the surge in property lending over the past five years that is plaguing the bank.

His salary as governor will be capped at €276,000, the salary set by the Government remuneration committee on bank pay and down from €525,000 during the boom.