Thursday 23 October 2014

Litany of failures revealed at Anglo trial damns 'finest brains in country'

Confusion over Anglo complaint highlights communication chaos

Published 04/05/2014 | 02:30

Brian Lenihan was Finance Minister at the time of the bank rescue
Brian Lenihan was Finance Minister at the time of the bank rescue

AS the guardian of the State's financial institutions, the Central Bank has had some of the finest brains in the country on its board. But the Anglo trial revealed a litany of failures and oversights at highest levels of the State agency.

However, there is one case in which Central Bank officials pursued alleged financial wrongdoing at Anglo with such zeal, that officials ended up overstepping the mark.

The Sunday Independent has learnt that the Central Bank reported the former Anglo Irish Bank to the garda fraud squad over suspicions that a proposal to merge with Irish Nationwide was a fiction aimed at boosting its falling share price.

But in a case of the regulator chasing the rabbit down the wrong hole, embarrassed investigators withdrew the complaint on discovering that senior figures in their own office had known all about it.

According to sources, the Central Bank launched the investigation in 2009 after Brian Lenihan, the then finance minister, told an Oireachtas committee how he had been approached about the proposed merger in September 2008.

Mr Lenihan also told the committee that he was "sceptical" and rejected it.

"We indicated we did not see it as a realistic proposal because the entire banking system was coming under considerable strain."

He pointedly stated that the merger proposal had been canvassed and written about in the media although it was never progressed at official level.

Mr Lenihan's comments are believed to have sparked an investigation in the Central Bank's markets division, which spent several months probing the motivation behind the merger proposals.

In 2010, officials referred the matter to the garda fraud squad for investigation, along with a report highlighting its suspicions of attempted interference in the bank's share price. A senior official at the Central Bank made a formal complaint to gardai.

The Sunday Independent has learnt that the Central Bank abandoned the case, after discovering that some of its own top officials had been briefed on the merger, undermining the contention that the merger proposal was a hoax.

In particular, it is understood that Con Horan, the second in command in the Financial Regulator's office, had been briefed on the merger proposal between Anglo and Irish Nationwide but the investigation team in the Central Bank was unaware of this.

The Central Bank said last week that it could not comment on the matter. One informed source said the case was another example of the communication breakdowns.

The role of the Office of the Financial Regulator – which is part of the Central Bank – was sharply criticised at the conclusion of the Anglo trial by Judge Martin Nolan.

Judge Nolan highlighted the failings in the State agency, including how its failure to take action "gave the green light" for illegal loans to a group of wealthy businessmen to buy shares in the bank.

Mr Horan was "candid and did his best" in giving evidence, the judge said.

But his boss, Patrick Neary, "seemed to have limited recall" and "difficulty in recalling several events".

Sunday Independent

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