Somers says no reason to tell Cowen about Anglo
Published 16/09/2010 | 05:00
THE decision by the National Treasury Management Agency (NTMA) to reduce its deposits with Anglo Irish Bank before the banking crisis erupted was part of a routine assessment of risk, NTMA's former chief executive Michael Somers has said.
Dr Somers was responding to fresh questions on whether he should have told the then finance minister Brian Cowen of any doubts NTMA had about Anglo.
"I had no information about Anglo that was not in the public domain, so what would I have said to Mr Cowen?" Dr Somers said last night.
"The bank had a narrow spread of deposits and our view was it was paying over the odds for funding. It was also growing at a fantastic rate and anything growing too fast risks a bubble and bust.
"All of that was known and, while the NTMA is in the risk business, I had zero tolerance for unnecessary risk and I wasn't going to take any. But I knew nothing in particular about Anglo. The Central Bank, with 1,000 staff, could go inside. Did I know more than them? I did not.
"I had no evidence that Anglo was in trouble and I never expected that they would effectively go bust. I had no reason to think things were going to go like that."
He stressed that the 100 or so banks with which NTMA deposited its typical cash holdings of €5bn-€10bn were regularly assessed by senior NTMA executives, partly based on their ratings from the credit rating agencies.
NTMA traders would be told how much they could deposit with each bank. "I would sign off on that, and I would also be told if any of the limits were breached," Dr Somers said.
"We made the Anglo decision long before there was any issue with the bank or a crisis."
The NTMA kept around €100m each in AIB and Bank of Ireland. In 2007, it deposited €40m with Anglo, at a time when deposits were weakening, and after what Dr Somers described to an Oireachtas committee as "pressure" to resume deposits.
"We preferred AIB and Bank of Ireland because they had a wide spread of small depositors. But I spent only a few hours a year on this assessment of banks. It was a minor task and I wasn't lying awake at night worrying about Anglo."