Banking inquiry: Banks ‘targeted’ customers after guarantee

Former Ulster Bank executive has ‘no doubt’ about proactivity to attract deposits

The former head of corporate markets at Ulster Bank told the Oireachtas Banking Inquiry today that he has "no doubt" that the domestic Irish financial institutions deliberately targeted its customers after the government announced its bank guarantee on September 30th, 2008.

Robert Gallagher, who was chief executive of corporate markets at Ulster Bank from September 2005 until 2011, said there was "no doubt in my mind" that staff at banks covered by the guarantee were "proactive with our customer base" at the time to attract their deposits.

He said €4 billion of deposits flowed out of Ulster Bank in the month after the government announced its guarantee, which he described as a “material outflow”.

The position changed in late October when Ulster Bank's parent company Royal Bank of Scotland was effectively bailed out by the UK government.


Mr Gallagher met the then minister for finance Brian Lenihan at a business event being hosted by Ulster Bank on the morning of September 30th, 2008, just hours after the government's guarantee decision had been made.

The guarantee did not cover Ulster Bank although the RBS subsidiary did initially apply for inclusion, according to evidence given yesterday by former Ulster Bank CEO Cormac McCarthy.

Mr McCarthy also attended the meeting with Mr Lenihan and the executives outlined their concerns on the impact of the guarantee on Ulster Bank’s deposits, Mr Gallagher said.

Michael Torpey, a former finance director of Ulster Bank, told the inquiry that he "very much regrets" his failure to foresee the turbulence in wholesale financial markets, the collapse of the Irish property market, and other events that led to the banking and economic crash in late 2008.


Mr Torpey was finance director of First Active for four years to January 2004, when the institution was acquired by Ulster Bank. He was then group finance director of Ulster Bank until December 2007.

He said that while he did not have operational responsibility for Ulster Bank’s lending policies during his time with the bank, he accepts that, as a senior executive within the group, he shared “responsibility” for the bank’s actions at the time.

Mr Gallagher said the “critical mistake” of the bank was to rely on positive economic assumptions in the years leading up to the crash. He said this was a “serious flaw” and he “deeply” regretted the mistakes made at the time.

Similar comments were made to the committee yesterday by Mr McCarthy, whose time in charge overlapped with both Mr Torpey and Mr Gallagher.

Mr Gallagher said Ulster Bank’s decision to promote 100 per cent mortgages from mid 2005 was incorrect. “With the benefit of hindsight it would have been better if that product had not been introduced,” he said.

Mr Gallagher managed relationship teams for corporate banking, business and commercial banking, commercial property finance and capitals markets in Ireland.

He revealed to the committee that his salary in 2005, the year he joined the bank, was €370,000 and €470,000 in 2006. His bonuses ranged from €99,000 in 2005 to €580,000 in 2008.

In response to a question from Socialist Party TD Joe Higgins, he accepted that the remuneration paid to executives at the bank was “excessive”.

When asked by chairman Ciaran Lynch if he merited his remuneration, Mr Gallagher said “ it was for others to assess” if he had achieved the goals set out for him to enhance capacity within the bank and to diversify its income.

Mr Gallagher now leads the Irish operation of global private equity giant KKR. Before his time at Ulster Bank, he had spent 14 years with AIB.

Mr Gallagher was questioned about Ulster Bank's "Journey to One" project, which was aimed at communicating to staff how it planned to take on AIB and Bank of Ireland to become the biggest player in the Irish market.

This involved trebling its current account numbers to 250,000, increasing its new mortgage lending from €5 billion a year to €15 billion, and doubling its market share to 30 per cent.


Mr Gallagher said there was a “real desire [within Ulster Bank and RBS] to compete with AIB and Bank of Ireland in a really substantial way”.

He said the strategy was to attract more customers and to have broad business relationship with them and was not about “winning” more property lending.

But he accepted that the bank’s lending was “undoubtedly too concentrated”, on property-related lending.

When asked about how Ulster Bank came to lend substantial sums to various commercial projects, including to Sean Dunne for his purchase of two high-profile hotel sites in Ballsbridge, Mr Torpey told the committee that he had "no part to play in these matters".

He had “no knowledge” of customers, their credit applications or the credit decisions by the bank.

Mr Torpey said that in the run-up to his departure from the bank in late 2007, there were “emerging signs of a liquidity crisis in the international markets”.

Senator Sean Barrett questioned the quality of governance and compliance within RBS in the years before the crash, given the events at the bank since 2008.

“My experience was that the approach of RBS group was one of very strong rigour in terms of compliance with policies and procedures,” Mr Torpey said.

He added that RBS exerted a “very strong level of control over Ulster Bank”, during his time with the bank. Large credit decisions were taken by RBS, he said.

Mr Torpey has been chief executive of corporate and treasury at Bank of Ireland since March 2013. He was previously head of banking at the National Treasury Management Agency from August 2011, managing the State's interests in the domestic banks.

Ciarán Hancock

Ciarán Hancock

Ciarán Hancock is Business Editor of The Irish Times