Board under increasing pressure for explanation

THE BOARD of Irish Life Permanent (IL&P) came under mounting pressure last night to confront how the institution managed a series of lodgements totalling €7 billion with Anglo Irish Bank, money used by the bank to conceal a drastic loss of deposits in financial accounts produced at the end of its fiscal year.

Amid astonishment and alarm in business circles that a major financial institution would cite “the green jersey agenda” in transactions that distorted the true state of a rival bank’s balance sheet, IL&P chairwoman Gillian Bowler and chief executive Denis Casey spent more than an hour with Minister for Finance Brian Lenihan yesterday explaining their stance.

IL&P’s board went into emergency session shortly afterwards, amid clear signals from the Government that it was not at all impressed with the arguments it was hearing.

In the Dáil, Minister for Environment John Gormley said “the latest revelations from Irish Life Permanent and Anglo Irish Bank will result in further resignations”.

Mr Lenihan did not go quite that far when he appeared on RTÉ television at tea-time, although he was in no mood to declare any sense of confidence in Ms Bowler or Mr Casey. It was not appropriate for him to say if he had confidence in them, he insisted, arguing that that question was one for the board to answer. To stress the point, the Minister said he expected the board “to face up to its responsibilities”.

Ms Bowler is the best-known figure on the ILP board, a person with a high public profile thanks to her frequent media appearances as founder of Budget Travel. However, the board at large draws its membership from the upper ranks of the banking, business, political and regulatory establishment.

Its members include: Liam O’Reilly, a former chief of the Financial Regulator; Ray MacSharry, former minister for finance and former EU commissioner; Danuta Gray, chief of O2 Ireland; Breffni Byrne, chairman of NCB Stockbrokers; Eamonn Heffernan, past president of the Society of Actuaries in Ireland and former chairman of the Pensions Board; and Roy Keenan, a non-executive director of Met Life Europe and former chief of Bank of Ireland UK.

ILP has claimed in private that it had implicit support from the Financial Regulator for the manoeuvres, through which it received short-term back-to-back loans from Anglo before returning €7 billion to the bank as deposits at the end of September. In strident terms, albeit in private, the regulator is disputing that it approved of the transactions.

The lodgements were routed through ILP’s fund management arm, Irish Life Investment Managers (ILIM). They were characterised as customer deposits by Anglo, enabling it to show a higher level of deposits on its books than was actually the case.

Interbank deposits are a matter of routine in banking. However, high-ranking business sources said the use of the customer deposits description, their funding with loans from Anglo and the deployment of ILIM were all deeply questionable.

The very scale of the transactions was questioned, as was the fact that the final €4 billion lodgement was made with the protection of the State guarantee on the liabilities of the entire banking system.

As the meeting continued last night, informed observers questioned whether IL&P had any mandate from shareholders to engage in any transactions “in the national interest” as implied by the “green jersey” expression.