The Oireachtas banking inquiry has heard that Bank of Ireland (B of I) knew it might need assistance in the months leading to the bank guarantee.
Speaking before the committee on Wednesday, chief executive Richie Boucher said it became clear to the bank in the summer of 2008 that it may need financial assistance from the government.
He said the bank had watched what was happening across the world and seen a significant change in the market.
The chief executive said B of I was adequately capitalised but was not “sufficiently capitalised for a storm that could come or to pursue the business model”.
Sinn Féin’s finance spokesman Pearse Doherty asked why they sought help from the government and the bank chief said this was following the market trend.
Mr Boucher said B of I was not fixated with the work of other banks but believed it was inevitable in 2008 that some banks wouldn’t survive and needed to be capitalised.
He said he had read the testimony of Allied Irish Bank’s (AIB) Dermot Gleeson who told the inquiry he believed Anglo Irish Bank and Irish Nationwide (INBS) would be nationalised.
Mr Boucher said he did not have that information that Mr Gleeson spoke of.
Mr Boucher earlier told the banking inquiry he knew on September 29th a “systemic guarantee” would be put in place.
Mr Boucher confirmed the position of his predecessor Brian Goggin that all banks would be covered by the government decision.
This is in direct contrast to the evidence of Allied Irish Bank before the committee.
The chief executive also defended his salary of €843,000 and said there is no bonuses in place at the bank.
He said: “My salary was approved by the minister for finance at that time and was voted on by the shareholders.
“The shareholders decide what I am paid.”
Mr Boucher also said he was subjected to a six month investigation by an independent third party on behalf of the Financial Regulator.
They were examining his role as chief executive of the bank and he said he co-operated with them fully.
Mr Boucher said this he has been subjected to regulator scrutiny by shareholders, investors and has been reappointed every year since 2009.
The chief executive said Bank of Ireland should never have been in a position where it needed taxpayers support.
He said: “It was wrong. I was member of a management team that made bad mistakes. I have made huge progress in rectifying that.”
Mr Boucher was asked about a letter he had written to Dublin City Council as head of retail about a property deal in 2007.
He said that was a “mistake” and one of the “many stupid things he had done”.
It was a letter of support for a development by Sean Dunne in Ballsbridge, Dublin 4.
Mr Boucher said he did not believe Bank of Ireland needed a guarantee on the night of September 29th, 2008.
Mr Boucher said he was called three times on the night of the guarantee. He said a call came at 11.30pm asking if Bank of Ireland could take over Anglo Irish Bank.
In his written statement, he said: “I recall that on the late afternoon of 29 September 2008 the Bank of Ireland Group CEO advised me and certain other colleagues that a meeting was to take place that night involving AIB and Bank of Ireland with the government and the Central Bank of Ireland at which, amongst other things the possibility of a guarantee would be discussed.
“On the night of 29 September 2008 myself and several other relevant colleagues were in our group headquarters awaiting information and feedback from the meetings which were taking place in Government buildings at which the Bank of Ireland Group CEO and governor (Chairman of the Bank) were representing Bank of Ireland.”
Mr Boucher said the bank was asked for liquidity support for Anglo which it agreed to do.
He said after midnight a call came through saying the Government had agreed to introduce a bank guarantee.
He said: “I recall that the group CEO contacted us later by phone conference call to advise that the government had decided to provide a guarantee for all deposits and liabilities.
“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.
“I recall that there was some surprise at this and the feeling was that this might not necessarily suit Bank of Ireland as there was a view that Bank of Ireland needed to strengthen its capital.
Mr Boucher said there would have been serious consequences if Anglo Irish Bank was allowed to fail.
He said a four-bank guarantee would have contained that.
Giving evidence at a hearing on Wednesday, Mr Richie Boucher said that there was “absolutely” over-lending to certain sectors of society before the crash.
He said this happened over 10-15 years and couldn’t say there was one particular point in time when there was a deliberate change in direction.
Mr Boucher said the Bank of Ireland executive board - which he was a member - did not seek enough information in terms of risk.
He said there was “less focus on the element of risk” and that was wrong.
The now chief executive said 100 per cent mortgages were wrong and he should have stopped it.
Mr Boucher said there was too much emphasis placed on ratio and computers and less focus on whether the route actually makes sense.
He said renumeration had a role in the decisions some people made but it was not a driver.
Mr Boucher said: “We might have thought our policies were better. We knew there was a large lot of lending going on. We went on.
“Could we have left at 11, could we have left at 12, could we have left before the bar re-opened? Yes we could.”
Mr Boucher said he has apologised to shareholders and taxpayers before and continues to do so.
He said he hopes he has shown how he is determined to right his wrongs over the past six and a half years as chief executive.
The chief executive said the action behind the words was his recognition that mistakes were made and he wanted to better them.
He said he has a “huge drive” to restructure the bank and make Bank of Ireland a “sustainable viable institution”.
Mr Boucher, who was a member of the executive board at the time of the crash, admitted responsibility for “errors of judgment”.
In his opening statement to the committee, he said: “Together with the board we made strategic mistakes and errors of judgment and I bear collective responsibility for these and my contribution to them. These mistakes and errors of judgment were similar in some or all respects to those made by virtually all banks operating in Ireland in the period 2000 - 2008 and by a very large number of banks internationally.
Mr Boucher, who earns €843,000, said he does not believe high remuneration was a factor in the mistakes were made.
He said: “While incentivisation and remuneration in Bank of Ireland was relatively generous compared to other industries, Bank of Ireland was not at the forefront of incentivisation and remuneration in Financial Services and arguably people who would have had financial reward as a key defining motivation would have or did go to work for other Institutions and some did.”
Mr Boucher earlier said he was “shocked and shaken” at a meeting in mid-September when he learnt of the extent of the losses at INBS.
He said B of I was not perfect but he was shocked by the scale of the problem.
The chief executive said: “The system was much bigger trouble than I anticipated.
He said he learned INBS needed €4 billion two weeks before the bank guarantee.
Mr Boucher said this was raised by the Financial Regulator who inquired about Bank of Ireland giving that money to INBS. He said Bank of Ireland was objected to that.
Mr Boucher said he was surprised subordinated debt was included in the guarantee and that former B of I chief Brian Goggin had lobbied for it
He said: “It is not for me to say what happened with the people on the pitch. I was more in the dug out. I was more thinking of implementation rather than technical details.”
He said there was no discussion between the board of the night of the guarantee - despite a series of calls between Mr Goggin and the board in Bank of Ireland headquarters.