Business Irish

Saturday 10 December 2016

'Window dressing' a known practice in banking, trial told

Declan Brennan

Published 08/04/2016 | 02:30

Photo: Getty Images/Ingram Publishing
Photo: Getty Images/Ingram Publishing

Balance sheet management and "window dressing" were interchangeable terms in banking for a known industry practice, a former senior accountant with Anglo Irish Bank has told a trial.

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Four former senior bankers from Anglo Irish Bank and Irish Life and Permanent (ILP) are alleged to have conspired to mislead investors by setting up a €7.2bn circular transaction scheme to bolster Anglo's balance sheet in 2008.

Peter Fitzpatrick (63), of Convent Lane, Portmarnock, Dublin; John Bowe (52), from Glasnevin, Dublin; Willie McAteer (65), of Greenrath, Tipperary Town, Co Tipperary; and Denis Casey (56), from Raheny, Dublin, have all pleaded not guilty at Dublin Circuit Criminal Court to conspiring together and with others to mislead investors through financial transactions between March 1 and September 30, 2008.

On day 44 of the trial, Ciaran Cunningham, who was senior manager with Anglo's Treasury Finance department, began giving evidence of how he and his department team had dealt with how the €7.2bn transaction would be treated in the bank's balance sheet.

Asked by Úna Ní Raifeartaigh SC, prosecuting, what he understood by the terms window dressing, balance sheet management or "managing a snapshot", the witness said it normally referred to short-term transactions done over the reporting period for a bank.

He said the terms were used interchangeably. He said the €7.2bn transaction with ILP was "cash neutral" and this meant that it didn't generate any new funds or liquidity.

Asked was there any commercial substance to it, he replied: "Balance sheet management". He later added: "The primary substance was to manage the snapshot."

He told Roisin Lacey BL, defending Mr Bowe, Anglo's then head of capital markets, that balance sheet management was something that was known in the industry.

He agreed that it may include overnight placements which would be reversed the next day and that this was not unusual.

Ms Lacey put it him that there was nothing untoward about balance sheet management and the witness replied: "The practice existed."

Counsel put it to him that it also known in the industry as "the calendar effect" and "putting on your best suit for the photograph" but the witness said he hadn't heard of those terms.

Asked by Ms Ní Raifeartaigh if there were any limits to what was acceptable with regard to balance sheet management transactions, he said he wasn't sure there were defined limits.

He added the "materiality" of the transaction - so whether it might be considered significant by shareholders or the market - would have to be assessed.

The jury has heard that the as a result of the allegedly circular transaction between the two banks, the figures for "loans and advances to banks" and "customer accounts" on Anglo's published balance sheet in December 2008 both increased by €7.2bn to €14bn and €51.5bn respectively.

Mr Cunningham agreed the fact that the €7.2bn made up half of the inter-bank loans figure of €14bn would make it material. The trial continues.

Irish Independent

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