Central Bank chased national pension fund

The Central Bank felt it should be given the job of managing the new £5 billion (€6.35 billion) national pension fund but lost out to the National Treasury Management Agency.

Mr Maurice O'Connell, the Governor of the Central Bank wrote to the Minister for Finance, Mr McCreevy, seeking to be involved in the project, which would have secured a long term role for the Bank. Since the creation of the European Central Bank (ECB) last year the Central Bank has ceded many of its powers to the new institution.

Although it currently manages a portion of the ECB assets, roughly €400 million, and Ireland's own reserves of £7 billion the Bank expects to have its role and status eroded further as the ECB grows.

Last October Mr O'Connell wrote to Mr McCreevy. He said the Bank had extensive expertise built up over decades in the management of large scale multi-currency porfolios "spanning all the world's major currency, capital and money markets".

The National Pensions Reserve Fund will come into being at the end of the year and is to meet future social welfare and public sector pension commitments. The Government has already set aside £5 billion for the proceeds of the flotation of Telecom Eireann and other income for the fund. The State is committed to putting 1 per cent of GNP into the fund each year. Mr O'Connell offered, on behalf of the bank, to either "supervise the management of the fund by external managers or to manage the fund in-house".

His approach appears to have been well received initially. A hand written note on a copy of his letter released under the Freedom of Information Act reads: "at first sight the bank's case seems a strong one". The Governor was invited to discuss the matter with departmental officials, although he was warned at that stage that the Minister favoured giving the job to the NTMA.

A report on the meeting prepared by a department official said that Mr O'Connell emphasised that he did not wish to be in the position of competing with another state agency for the job.

He went on to stress that asset management, which was what the new job involved and what the Central Bank was expert in, was fundamentally different to liability management, which was the job of the NTMA which looked after the national debt.

He also pointed out that whichever agency got the job they would have to buy in expertise in many areas such as equity and property investment.

Departmental officials seemed open to the idea of the Central Bank being involved, but the matter seemed to die shortly after the meeting. The job was eventually given to the NTMA with the backing of Mr McCreevy and despite the reservations of his officials.

At the time the Bank was the subject of a great deal of adverse publicity in connection with its role in the policing of DIRT, which was being investigated by the Public Accounts Committee. The Moriarty tribunal was also looking into the Bank's failure to take action over the Ansbacher accounts. A spokesman for the Central Bank declined to comment on the issue this week. He said it was too early to say whether the Central Bank would be interested in working under the NTMA in the management of the fund.