Banks wanted Anglo, INBS ‘taken out’ on night of guarantee

AIB and Bank of Ireland wanted Anglo Irish Bank and Irish Nationwide Building Society to be “taken out” on the night of the bank guarantee in September 29th 2008, according to a senior lawyer who was advising the government on the banking crisis.

Speaking to the Oireachtas banking inquiry today, Eugene McCague, a partner and former chairman of leading law firm Arthur Cox, said he took this as meaning the nationalisation of the two institutions.

Arthur Cox was engaged by the government on September 24th 2008 as an external adviser on the banking crisis. In worked in tandem with Merrill Lynch, PwC and Rothschild.

More than 120 Arthur Cox lawyers worked for the department of finance and its agencies during the crisis.

Mr McCague was in Government Buildings on the night of the guarantee and said both AIB and B of I representatives spoke at length about the potential of a collapse at Anglo.

AIB’s former chairman Dermot Gleeson told the meeting that another fall in Anglo’s share price could be “seen as a proxy for a serious risk to deposits” and could lead to a run on the banks, Mr McCague said.

Mr Gleeson wanted Anglo and Irish Nationwide to be “dealt with” and the other banks to be guaranteed.

Liquidity issues

Mr McCague said both the former Central Bank governor John Hurley and the Financial Regulator Patrick Neary told the government on the night that Anglo was solvent but had liquidity issues.

He said that the taoiseach Brian Cowen and the minister for finance Brian Lenihan decided that the correct course of action was not to nationalise Anglo or Irish Nationwide, but to guarantee the six banks.

Mr McCague said AIB and B of I were then informed of the decision.

Also appearing at the hearing, Pádraig Ó Ríordáin told the committee that Arthur Cox was assigned the tax of developing legal structures in September 2008 for two potential options - the nationalisation of a bank or building society, or and the potential creation of a structure to increase liquidity across the banking sector.

Mr Ó Ríordáin was managing partner of Arthur Cox from 2003 to 2011 while Mr McCague was chairman of the firm from 2006 to 2013.

Mr Ó Ríordáin told the committee that Arthur Cox began acting for B of I on issues relating to the crisis from October 2008. This appointment was cleared with the department of finance.

Mr Ó Ríordáin declined to quantify what percentage of its revenues was derived from the banking sector and financial crisis but said it was a significant part of its practice.