Casey had to obey when he got his marching orders
Irish Life & Permanent chief executive Denis Casey
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Oh, for crying out loud, who did these people think they were codding? If the board had wanted Casey to go then he would have been out on his ear
Yesterday Denis Casey finally bowed to the inevitable and quit as boss at Irish Life & Permanent.
With the Government clearly signalling that it wanted him out, his resignation became inevitable.
It seemed to have been an escapology act of which the late, great Harry Houdini would have been proud. Just when it seemed as if our hero was doomed, he managed to extricate himself from his predicament and emerge apparently triumphant.
But this wasn't some three-ring circus but the Irish banking system. Irish Life & Permanent, long regarded as one of the pillars of the Irish establishment, had been caught red-handed helping the disgraced Anglo Irish Bank to pretty up its books.
With Anglo's September 2008 year-end rapidly approaching and with depositors having already withdrawn €4bn during the month of September, Anglo needed to do something and fast if investor and depositor confidence wasn't to completely collapse.
That "something" involved IL&P "borrowing" €7.45bn from Anglo between September 26 and September 30 and then depositing all or most of the money back with Anglo. Even more shocking was the fact that most of this money went through Irish Life's assurance arm Irish Life Assurance.
By routing the money through ILA, the "deposit" qualified as a retail customer deposit rather than as an inter-bank loan. The net effect of all this financial jiggery-pokery was to make Anglo's financial position appear much stronger than it really was.
Prim
As if that wasn't bad enough, it is now clear that this wasn't the first time that IL&P helped Anglo to window-dress its accounts. According to the statement issued by IL&P early yesterday morning, it also deposited €750m with Anglo just before the end of its half-year in March 2008.
It says something about the low esteem in which Anglo is now held that no-one was in the least bit surprised when yet a further piece of financial legerdemain came to light.
It, was however, a different story with IL&P. If Anglo was thought of as the wastrel son of the Irish financial system, then IL&P would have been widely perceived to be the prim and proper maiden aunt. A bit stuffy perhaps, a stickler for the correct standards, but as straight as a die.
Imagine our feelings then when IL&P was found to have been conducting an illicit affair with the young rake all along, and right under our noses too! A mixture of shock, betrayal, incredulity and amazement gradually hardening to anger as the realisation dawned upon us that we had been played for fools all along.
IL&P has its origins in Irish Life, the state-owned company that was formed from the compulsory amalgamation of several mainly British-owned life assurance companies in 1939.
Despite its state-owned status, Irish Life was never just another semi-state. Fianna Fail largely resisted the temptation to use the company as a patronage opportunity. Mindful that its main competition came from the Scottish mutuals such as Standard Life, Irish Life deliberately cultivated a 'Protestant' ethos.
Until well into the 1980s, most of Irish Life's senior executives still came from Protestant backgrounds. In fact it was not until Denis Casey ascended to the top job in May 2007 that Irish Life & Permanent (as the company was renamed following its 1999 takeover of Irish Permanent) got its first Catholic chief executive.
Since peaking in February 2007, Irish bank shares have fallen by a massive 97pc. IL&P has not been immune from this share price collapse with its share falling by 92pc from almost €22 to just €1.80.
However, despite this precipitous fall in its share price, IL&P had largely managed to avoid becoming embroiled in the various scandals which have engulfed Irish banking. Unlike most of the other banks IL&P has a very low exposure to the embattled commercial property and construction sectors with less than 5pc of its €41bn loan book being to builders and property developers.
While the vast bulk of IL&P's loan book, about €36.4bn, is made up of residential mortgages, the word on the street is that the Permo's portfolio of homeloans is relatively clean. Also working in IL&P's favour was that it had in Irish Life, the largest life and pensions provider in Ireland, a separate revenue stream generating more than half of its profits, which could be used to prop up its mortgage lending subsidiary Permanent TSB.
In fact IL&P's only major problem seemed to be that the Permo had largely funded its growth through wholesale, inter-bank funding rather than through retail deposits. At the end of June just 39pc of the Permo's loan book was funded by retail deposits. This meant that IL&P needed the unconditional guarantee of the deposits and bonds of the Irish-owned banks, which was issued by the Government on September 30, more than any of its competitors. And now this. What were Casey and his colleagues thinking about? When news of the IL&P "deposits" with Anglo first broke this week, the Government made it abundantly clear that it expected the IL&P board to do the decent thing and fire Casey.
Instead, at an all-night board meeting that only ended at 3am yesterday morning, IL&P finance director Peter Fitzpatrick and group head of treasury David Gantly were thrown to the wolves. The board, according to the statement issued by IL&P after the meeting, "declined an offer of resignation by group chief executive Denis Casey".
Oh, for crying out loud, who did these people think they were codding? If the board had wanted Casey to go then he would have been out on his ear. Likewise if Casey had concluded that his position was untenable it is inconceivable that the board would have tried to persuade him to stay on.
Refusal
Ever since the Irish banking crisis began in earnest last September, Casey had fought a determined rearguard action to prevent IL&P being forced into a shotgun marriage with either AIB or Bank of Ireland.
Unfortunately the very qualities which had up to then proved so effective in warding off the attentions of unwanted suitors, including Casey's dogged refusal to admit defeat, were now the very ones which risked turning the current crisis into one that threatened IL&P's continued existence.
The Government was having none of it. The IL&P non-executives were summoned to a meeting with Brian Lenihan yesterday afternoon where it was made clear what was expected of them. Casey announced his decision to quit before teatime.
When the Minister for Finance signals that a bank boss must go then, regardless of the rights or wrongs of the situation, go he must.
- George Garvey
