Bank of Ireland knew in 2008 it couldn’t weather financial storm

Bank of Ireland knew in the summer of 2008 that it did not have enough funding to weather a financial storm and could need government help, the banking inquiry heard yesterday.

Chief executive Richie Boucher told the committee the institution was solvent on the night the guarantee was put in place. However, he admitted there was “increasing recognition” three months beforehand it could need assistance from the State.

Mr Boucher said the bank was adequately capitalised, but it wasn’t “sufficiently capitalised for a storm that could come”.

Under questioning from Sinn Féin’s Pearse Doherty, Mr Boucher said they looked to government because the markets followed that trend.

The chief executive of the bank was a member of the executive board when the decision to guarantee the banks was made. He said he knew on the night that the government was to introduce a systemic guarantee across the six main lenders.

Nationalised

This backs up the evidence of his predecessor Brian Goggin, but contradicts that of Allied Irish Bank, who insisted they were led to believe only Anglo Irish Bank and Irish Nationwide would be nationalised.

Mr Boucher was not in Government Buildings when the decision was made, but was in the headquarters of the bank. He said he was called three times and a call came through after midnight saying the government had agreed to introduce a bank guarantee.

“I recall that the group CEO [Mr Goggin] contacted us later by phone conference call to advise that the government had decided to provide a guarantee for all deposits and liabilities,” he said.

“I recall that there was some discussion on whether the guarantee would cover subsidiaries and what the definition of liabilities was. I cannot fully recall whether it was during that call or in a further later call from the group CEO which advised that certain subordinated liabilities were also to be covered by the guarantee.”

Mr Boucher said he was surprised by that decision, despite Mr Goggin, the then chief executive, lobbying for it.

He said he was not criticising that position, but was highlighting a difference of opinion between the two.

Mr Boucher also said there would have been serious consequences if Anglo Irish Bank was allowed to fail.

He described himself as “shocked and shaken” at a meeting in mid-September 2008 when he learned of the extent of the losses at Irish Nationwide. He said Bank of Ireland was not perfect, but he was shocked by the scale of the problem. The chief executive said: “The system was in much bigger trouble than I anticipated. I remember being extremely shaken by it.”

Mr Boucher told the committee there was a belief the government was not aware of the extent of the crisis.

Annual salary

He also defended his annual salary of €843,000 and insisted it was a decision made by the shareholders that he had no role in.

He confirmed he was subjected to a six-month investigation by an independent third party on behalf of the financial regulator. Mr Boucher said Bank of Ireland should never have been in a position where it needed taxpayers support.

“It was wrong. I was a member of a management team that made bad mistakes. I have made huge progress in rectifying that.”

He said he regretted any role he played in the crash. “The actions over the past 6½ years are a recognition of the mistakes I made and my responsibility and a huge drive I have to restructure the bank, to make it a sustainable, viable institution.”