Only handful of management knew all of bank's activities

ANGLO IRISH BANK:ONLY A handful of management were aware of all of the activities at Anglo Irish Bank in the run-up to the banking crisis, according to the report. Insufficient checks and balances were in place at Anglo from 2003 to 2008, and governance "fell short of best practice".

“While procedures and processes in Anglo existed on paper, in certain cases they were not properly implemented or followed in practice,” the report said.

The commission of investigation criticised former board members at the bank. There was little evidence they were active in challenging Anglo’s approach or its pace of lending growth.

Loans grew from €23.7 billion in 2004 to €72.2 billion in 2008.

The commission found that board members were “not expert” in banking, and were “dependent on senior management to assess the needs for the reporting systems and procedures necessary to contain the key risks identified”.

The passing of the role of chief risk officer to finance director (Willie McAteer) in 2007 was criticised: “This decision would suggest that risk management was not appropriately prioritised.”

Lending policies were treated “as guidelines rather than strict rules”. In the first three months of 2006, 1,047 loans were approved by Anglo’s credit committee, of which 519, or 49 per cent, were exceptions to credit policy.

Lending criteria and credit procedures “were not tightened but were in fact relaxed, especially from 2005 onwards, leading to accumulation of risk”. The risks were “not properly recognised or managed”, the report said.

The Financial Regulator was aware of many of the problems at Anglo and submitted “a comprehensive list of procedural and portfolio problems” to the bank.

The report said it was “not clear” whether all key letters from the regulator, highlighting the bank’s lending and risk management shortcomings, were disclosed to Anglo’s board or to its risk and compliance committee.

One of Anglo’s strong selling points was its “speed of approval” and the bank’s view on problem loan applications was that “there is a ‘yes’ in there somewhere”.

The Anglo board was not aware of the significant risks in growing the loan book as it had a lack of banking expertise to identify shortcomings in risk management.

These included the reporting of exceptions to Anglo’s credit policy as a percentage of overall loans rather than by each borrower.

Anglo tried to “de-risk” itself by stopping new developer lending in 2006, but lending to existing customers continued strongly, even in 2008 in the run-up to the crisis.

Loans to the 20 biggest customers amounted to half the Irish loans of €41.7 billion in May 2008.

Anglo’s market value grew by more than 2,000 per cent to a peak of €13.3 billion in 2007.