Anglo executive shocked at regulator’s hostile reaction to ILP transactions

A former Anglo Irish Bank executive has told a jury he was shocked at the “hostile and aggressive” reaction of the regulator to transactions with Irish Life and Permanent as he believed “the regulator was aware they had taken place”.

Matt Moran, former chief financial officer at Anglo, was being cross-examined today at David Drumm’s conspiracy to defraud trial, at Dublin Circuit Criminal Court.

On day 36 of the trial, he agreed with Brendan Grehan SC, that during a regular meeting at the financial regulator’s office he was “suddenly being asked questions as if the regulator knew nothing about the transactions”.

“I didn’t expect the matter to be brought up in such a strong manner by the regulator,” he said.

This meeting took place on January 12th or 13th, 2009, the court heard.

Mr Moran said following the meeting, he contacted Mr Drumm, who had by this time left Anglo, and asked him about the regulator’s awareness of the transactions with ILP.

“Mr Drumm replied to you very swiftly after you made the inquiry?” Mr Grehan asked the witness.

Mr Moran agreed. The jury viewed an email from Mr Drumm, stating that all minutes of meetings reflected that balance sheet would be managed over year end, adding that this was common practice in all banks, “credit crunch or not”.

Mr Drumm wrote that he was happy ILP wouldn’t let him down and said “you have to show access to get access”.

Mr Moran told Mr Grehan that he took this to mean that a bank had to engage in transactions with other counterparties in the market in order to create a positive effect.

Mr Drumm’s email advised Mr Moran to check the minutes of September 2008 meetings that he had attended “with Horan and Neary at Dame Street” and told him to talk to Willie McAteer as he had also been present.

“My memory is it was all about funding and what we were going to do. It was focused on the loss of customer funding,” he wrote.

Mr Drumm’s email said he recalled that at the wrap-up at the end of a meeting, Mr McAteer informed Con Horan that Anglo would be “doing balance sheet management over year end, and mentioned taking in some short-term deposits”.

Mr Drumm wrote that the regulator referenced the situation in Italy where Italian banks were working together, and said while this was fine in theory, the reality was “the two big boys wouldn’t help us”.

Mr Moran agreed with Mr Grehan that this was a reference to AIB and Bank of Ireland.

Mr Moran told the jury that he made a note following a conversation with Mr McAteer in September 2008, and recorded the regulator as saying “fair play to you Willie” in response to the issue of Anglo’s balance sheet management.

Mr Drumm ended his email by telling Mr Moran that both the Central Bank and the regulator were fully aware on all problems facing and on what the bank was doing to protect itself.

“If they insist on killing the bank with this for no reason to try and protect themselves I will go public on it,” Mr Drumm wrote.

When asked by Mr Grehan what would have happened had the transaction with ILP not gone ahead Mr Moran said it would have been negative for Anglo.

He agreed that it could have been fatal and led to a total loss of confidence in the bank.

“It would have demonstrated people were not willing to engage with Anglo,” he said.

Mr Drumm, with an address in Skerries, Co Dublin, has pleaded not guilty to conspiring with former bank officials Denis Casey, William McAteer, John Bowe and others to defraud depositors and investors at Anglo by “dishonestly” creating the impression that deposits in 2008 were €7.2 billion larger than they were.

He has also pleaded not guilty to false accounting on December 3rd, 2008, by furnishing information to the market that Anglo’s 2008 deposits were €7.2 billion larger than they were.

The trial, now in its sixth week, continues before Judge Karen O’Connor and a jury.