Business heavyweights to join bank boardrooms
Sunday October 26 2008
THE government will name a panel of 24 business "heavy- hitters" to become public interest directors on the boards of the banks in the coming days, the Sunday Independent can reveal.
The news comes as Brian Lenihan's Department of Finance denied a change to the bank guarantee scheme had taken place which would see the taxpayer and not the banks footing the bill if one of the institutions collapses.
Under the terms of the deal, the banks will be able to choose the non-executive government nominee, a measure which has brought significant criticism on the Taoiseach Brian Cowen and Minister for Finance Brian Lenihan.
The Cabinet was asked last week to come up with a list of names of people who "can be trusted to be hard-nosed and determined" to act in the public interest.
According to senior government sources each of the banks covered by the scheme will see one or two public directors on their main board. It has also emerged that directors will be appointed to the loan committees, credit committees, remuneration committees and risk committees of each bank concerned.
Senior bank sources speaking this weekend spoke of the "tangible relief" that no senior executive had to resign as a result of the bailout by the Government.
Late on Friday night, Mr Lenihan signed into law the guarantee to cover the six Irish institutions -- AIB, Bank of Ireland, Anglo Irish Bank, Irish Life & Permanent, EBS and Irish Nationwide Building Society.
The remaining five institutions -- Ulster Bank, IIB, First Active, PostBank, and HBOS -- are expected to officially sign up to the scheme on Tuesday, the Sunday Independent has learned.
However, there was still confusion yesterday about whether the other banks or the taxpayer would be liable to pick up the bill for a bank failure. Last week, the Department of Finance issued a "market notice" to the stock exchange which said the banks were "not required" to indemnify the minister in respect of payments made to cover another institution in the scheme.
The draft scheme earlier this month said all guaranteed banks would have to cover any state losses incurred if one bank was forced to claim under the scheme.
However, yesterday a Department of Finance briefing document said "the indemnity does not extend to amounts owing by other covered institutions to the minister in circumstances where the minister is required to make a payment on a guarantee given in respect of that other covered institution's liabilities. There is no cross-indemnity".
A Department of Finance spokesman said the use of the word indemnity was merely a legal word, which would force the other banks to pay up at once if one of them faltered.
- DANIEL McCONNELL
