Davy’s interim chief promises staff firm will move quickly to address failings

Bernard Byrne says it is not right workers should pay for indiscretions of others

Davy is preparing to hire an outside firm to carry out an independent review of matters arising from the Central Bank’s findings.  Photograph: Niall Carson/PA Wire

Davy is preparing to hire an outside firm to carry out an independent review of matters arising from the Central Bank’s findings. Photograph: Niall Carson/PA Wire

 

Davy’s interim chief executive Bernard Byrne promised the stockbrokerage’s 700-strong workforce that the firm would move quickly to try to address failings that resulted in the firm receiving a €4.1 million fine and rebuke from the Central Bank last week.

Mr Byrne, a former chief executive of AIB, was appointed to the role on Saturday after a number of senior departures as Davy sought to contain a growing crisis. He said that he didn’t believe it was right that staff should pay for the indiscretions of others and promised to be as open and transparent as possible while following due process.

The talk came hours before Davy announced that it was closing its bond desk, resulting in four redundancies. Following the move, none of the 16 individuals involved in the trade at the centre of the scandal are working for the firm, it said.

The announcement came hours after the National Treasury Management Agency (NTMA) withdrew Davy’s ability to act as a primary dealer of Irish Government bonds, in an unprecedented move, as the State’s largest stockbrokerage deals with the fallout from the scandal.

“As I mentioned this morning, on behalf of the board, we continue to offer our unreserved and unequivocal apology and regret to all Davy people and to our clients for what has occurred,” Mr Byrne said in an internal email after news of the bond desk closure broke on Monday evening.

Biggest crisis

“Our number one priority right now is to restore the trust of our people, our clients, and the public by acting decisively to ensure that nothing like this can ever be permitted to occur again.”

Davy chief executive Brian McKiernan, deputy chairman Kyran McLaughlin and head of bonds Barry Nangle resigned over the weekend as Davy struggled to contain the biggest crisis in its 95-year history.

The Irish Times reported last week that all three, as well as former chief executive Tony Garry and one-time head of institutional equities David Smith were part of the group involved in the bond deal.

Davy is preparing to hire an outside firm to carry out an independent review of matters arising from the Central Bank’s findings.

On Monday afternoon, the board of the NTMA said that it had reached its decision to pull Davy’s authorisation as a primary dealer “based on its assessment of the very serious findings relating to the firm that were made by the Central Bank of Ireland last week and following engagement with investors in Irish Government debt over recent days”.

Davy was the only Irish-owned firm among the 15 primary dealers of Government bonds recognised by the NTMA, and would have been required to find buyers for State debt as the NTMA seeks to raise as much as €1.5 billion in a bond auction on Thursday.

Reputation

Primary dealers typically break even at best handling regular auctions, but stand to make considerable amounts in fees in managing larger bond sales, or what are known as syndicated bond deals.

Davy would have made about €4.5 million in fees from being one of six managers of such deals in three major bond sales since the start of 2020, through which the NTMA raised almost €16 billion, driven by the Government’s need for funds to deal with the spiralling costs of the Covid-19 pandemic.

“A primary concern for the NTMA is to maintain the reputation of Ireland as a sovereign issuer in the bond market and the orderly functioning of the market for Irish Government debt,” the agency said.

“In this context, the NTMA believes that the behaviour described in the Central Bank findings falls substantially short of the standards expected from market counterparties, peers and colleagues in the bond market and is potentially damaging to Ireland’s reputation as a sovereign issuer.”

Minister for Finance Paschal Donohoe said the NTMA had made an “appropriate decision given the recent very serious findings of the Central Bank”.