Central Bank could do ‘very little’ for Anglo on guarantee

The then governor of the Central Bank John Hurley told a senior banker more than 12 hours before the State bank guarantee that there was “very little that he could do” to stop Anglo Irish Bank collapsing the following day, an event that would have threatened Ireland’s entire banking system.

Richard Burrows, then governor of Bank of Ireland, said that on the afternoon of September 29th, 2008, he tipped off Mr Hurley that Anglo urgently needed between €2 billion and €3 billion in new funding but "Mr Hurley advised me that there was very little that he could do in the circumstances".

In accounts given to gardaí and published for the first time in today's Irish Times , the country's top bankers during the financial crisis detailed the negotiations that took place between the banks and the State on the night of the bank guarantee.

Protection
The bankers said they were asked to pump €10 billion into Anglo but refused without protection. Instead, the government decided to blanket guarantee all deposits, bonds and loans totalling €440 billion at its six domestic lenders.

Mr Burrows said he told the State that night his bank would only help Anglo if there was “a guarantee from the government that the Bank of Ireland would get its money back”.

Dermot Gleeson, then chairman of AIB, said his bank had said it would give Anglo €5 billion but only for a few days.

“It was all done on foot of the very clearest representations from the Central Bank governor, made in the presence of the government (although not endorsed by the government) that an orderly dealing with Anglo would occur at the following weekend,” Mr Gleeson said.

Meanwhile, AIB's then chief executive Eugene Sheehy said Irish Nationwide was also on the agenda that night, as he believed it would fall after Anglo.

“I referred to threats to the system generally because of the weakness of Anglo and Irish Nationwide,” he said. “We had some detail to support our concerns about Irish Nationwide.”

Decision
Five years and almost seven months after the government decided to guarantee the banks – at an ultimate cost of €64 billion – the bankers' version of what occurred has emerged.

Mr Gleeson’s account described a “general chaos of which Anglo was of course a part” in the build-up to the guarantee.

Bank of Ireland's then chief executive Brian Goggin said Bank of Ireland told the State that night: "We felt it was necessary for the government to guarantee the deposits and borrowings of the banking system as a consequence of Anglo Irish Bank's grave position."

An account by Alan Gray, an economist and director of the Central Bank, told how that night he was rung by then taoiseach Brian Cowen and asked how he thought the markets would react to a State guarantee of banking deposits.