Wednesday 7 December 2016

€7m advisers on guarantee 'warned of nutty loans'

Sam Smyth

Published 04/02/2011 | 05:00

FINANCE Minister Brian Lenihan paid €7m for advice on the bank guarantee from a company that had earlier warned clients about the reckless risks taken by Irish bankers.

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Investment bankers Merrill Lynch advised the Government to guarantee the banks in September 2008 -- but six months earlier their analysts damned the big three Irish banks in a private report.

The report, circulated to clients on March 13, 2008, revealed that Anglo Irish Bank, Bank of Ireland and Allied Irish Bank were making the "nuttiest" loans.

But within hours of being circulated it was withdrawn and the analyst who wrote the report was later "let go" from the company.

Merrill Lynch had earned enormous fees from the growth of Irish banks and had been a lead underwriter of Anglo Irish Bank's bonds and the corporate broker to AIB.

Writer Michael Lewis makes these damning revelations in an article on the Irish banking and political crisis in the March issue of 'Vanity Fair'.

Mr Lenihan last night confirmed he had read an advance copy of the controversial article, but declined to comment on it.

Sources close to the minister said that the National Treasury Management Agency had recommended Merrill Lynch to advise on the bank guarantee.

It emerged in 'Vanity Fair' that the €7m advice to Mr Lenihan from Merrill was delivered in a seven-page memo.

The analyst who had tracked the Irish banks for Merrill Lynch had been concerned about the relationship between property developers and the Irish banks.

Reports

After writing a series of reports on Irish banks, the analyst did a survey quoting insiders' views about bank lending and the commercial property market.

According to Mr Lewis, the analyst's report said: "The Irish banks were making far riskier loans in Ireland than they were in Britain, but even in Britain they were the nuttiest lenders around: in that category, Anglo Irish, Bank of Ireland, and AIB came, in that order, first, second, and third."

The Irish banks threatened to take their business away from Merrill Lynch, according to Mr Lewis, and the company's in-house lawyers dropped quotes and toned down the report.

Irish Independent

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