Saturday 24 March 2018

Anglo were advised records 'show Regulator knew of IL&P deposit'

Laura Noonan

Laura Noonan

EVIDENCE held by Anglo Irish Bank would make it "difficult" for the Financial Regulator to deny early knowledge of the bank's controversial balance-sheet management exercises, according to a legal opinion from Matheson Ormsby Prentice (MOP).

Documents seen by the Irish Independent show MOP gave the assurances to Anglo on January 22, 2009 -- the day after a senior official at the Financial Regulator's office allegedly "rounded" on Anglo for the deposit deals.

The ensuing controversy saw three senior executives at Irish Life & Permanent forced to resign for their role in bolstering Anglo's deposit base by €7.6bn through a complex back-to-back transaction ahead of the bank's September 2008 year-end.

In a legal opinion sent to Anglo chairman Donal O'Connor, MOP analysed a lengthy report from the bank's audit committee into the balance-sheet management exercises that saw Anglo artificially boost its deposit base at crucial periods.

The audit report features reams of correspondence between Anglo and its regulator -- including emails, letters, notes of meetings and recordings of telephone calls.

"Based on the information contained in the draft report, we believe it would be difficult for the Financial Regulator to say that it was not aware that measures were taken to support the bank's balance sheet," MOP told Anglo.

The account appears at odds with the Regulator's decision to launch a probe into the Anglo/IL&P transactions in early 2009, when a parallel investigation was also launched by the Office of the Director of Corporate Enforcement.

MOP backs up its opinion on the Regulator's early knowledge by pointing to "references of meetings with the bank's senior management and senior management of the Financial Regulator".

Aware of support

"It would appear that the Governor [of the Central Bank] and senior management were aware that support was provided by the bank and would be provided for the bank at its year-end in September 2008," the MOP letter said.

"The evidence supports the conclusion that the bank provided details of the September transactions [to the Central Bank and regulator] as early as 1 October 2009 [sic, 2008]."

The claim implies the authorities were alerted to the deposit arrangements almost immediately after the €7.6bn flowed into Anglo's accounts on September 30, 2008.

Anglo and IL&P weren't taken to task on the deposits until January 2009, after a report by consultants PriceWaterhouse Coopers drew attention to the arrangement and the Department of Finance began questioning the deal.

MOP stressed, however, that while there was evidence that the Regulator knew about the deal at an early stage, there was "no evidence" that the "precise detail" of the arrangement was discussed with senior regulatory officials.

A spokeswoman for MOP said the firm couldn't comment "without client consent". A spokeswoman for the Regulator declined to comment.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business