MINISTER FOR Finance Brian Lenihan provided a letter of comfort on the day the bank guarantee was introduced in 2008 to allow Anglo Irish Bank to borrow from the Central Bank in the event of the guarantee failing to stop a run on its deposits.
The letter, which was disclosed in the Comptroller and Auditor General’s 2009 annual report last week, allowed Anglo to borrow from the Central Bank under “special liquidity arrangements”.
Anglo was the only bank that was supported by a letter of comfort from the Minister on the day of the guarantee, September 30th, 2008, allowing it to tap Central Bank borrowings to prop it up.
A spokesman for the department said the letter was provided in case the guarantee – agreed just hours earlier – failed to improve Anglo’s dire situation. He said the bank did not borrow from the Central Bank at that stage under the special arrangement as the level of deposits increased on the day the guarantee was introduced.
It later emerged that Anglo benefited from a short-term back-to-back €7.45 billion deposit arrangement with Irish Life Permanent over the bank’s September 2008 year-end, boosting the reported level of deposits on that day.
The transaction, which flattered Anglo’s balance sheet in accounts published just over a month later, is now the subject of investigations by the Garda Bureau of Fraud Investigation and the Director of Corporate Enforcement.
Since Anglo’s nationalisation in January 2009, the bank has drawn heavily from both the European Central Bank and the Central Bank to prop up its funding as retail and corporate deposits have been withdrawn from the bank.
Anglo had drawn €26.3 billion in Central Bank funding as of June 30th last including €11.6 billion borrowed under special liquidity facilities, according to the bank’s recently-published interim results.
A spokeswoman for the Central Bank said it could supply “exceptional liquidity assistance to institutions when that is judged necessary”, but that it does not comment on individual banks.
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