Bank feared action might cause public resentment

A retired chief executive of AIB told the tribunal yesterday that the forgoing of almost £400,000 interest in the resolution of Mr Charles Haughey's debt was "a good settlement from the bank's point of view", given the troublesome nature of the account.

Mr James Fitzpatrick said the former Taoiseach's account was "more or less out of control" by January 1980, having gone into debt by £1.14 million.

At the time, the bank was "trying to extricate ourselves from the account as quickly as possible", he added.

This was achieved without having to resort to the "doomsday situation" of making Mr Haughey bankrupt, he said.

Such a move "would certainly have been a very serious issue for the bank to consider . . . if he had a very strong following and if we took action that was seen to be damaging to him, it could have repercussions on the bank's business".

Mr Fitzpatrick said the settlement also benefited AIB in that it retrieved the principal sum borrowed by Mr Haughey and some additional money to pay interest.

"£750,000 cash was provided towards the debt. The actual principal sum, the amount actually borrowed as distinct from interest, was under £700,000."

He said the balance of indebtedness was caused by normal and penal interest charged because the account did not stay within authorised limits.

That interest was kept in a suspense account and was not added to the bank's profits or income.

He said that by reaching the settlement "the bank had achieved its objective, if you like, of getting rid of this account and getting it out of the bank's books".

He added "we could have been in an impossible situation if the account had just grown and grown and grown".

In this regard, he noted "Mr Haughey was a very prominent, powerful figure with a very large following in the country", and any action that could be seen to be unreasonable could have led to resentment from a large number of people and could have damaged the bank's interests.

Mr Fitzpatrick, who served as chief executive between 1976 and March 1980, was one of eight banking officials who gave evidence on the settlement yesterday.

Prof Patrick Lynch, deputy chairman of AIB between 1975 and 1984, said he was also aware of the troublesome nature of Mr Haughey's account.

He said it was unusual for the bank to write off debts, adding that if the security on a debt was adequate, it would be realised.

However, he could recall similar sums of interest being forgone, he said, in the case of farmers in 1979-80, a period of high interest rates.

But there would not have been many personal, as opposed to commercial debts, in the region of £1 million, he said.