Wednesday 20 November 2019

Another bad call for the record

Donal O'Donovan

Donal O'Donovan

THE latest Anglo Tapes were recorded at the start of November 2007 – almost 11 months before the infamous "night of the bank guarantee".

The latest tape shows the crisis in the bank, including its reliance on the European Central Bank for finance, dates back much further than anyone has yet acknowledged.

It records a conversation between the bank's acting director of Treasury John Bowe and his more senior London-based colleague Declan Quilligan, who at the time ran Anglo's operations there.

Mr Bowe reveals his very real fear that Anglo is in immediate danger of losing €10bn of its crucial corporate deposits. That money could be gone by the time preliminary annual results are due to be published at the end of the month, he tells his London colleague.

Mr Bowe says he's not wanting to "panic" but says the bank needs to come up with a strategy to convince the markets that Anglo's finances are sound.

While it's clear the two men knew their bank was in trouble, they reassure each other that the crisis is being driven by "hedgies" – aggressive hedge fund investors and cynical brokers – rather than acknowledge that the Anglo model of borrowing on the markets to lend to investors is flawed. Staggeringly, the two bankers describe how, as early as 2007, the bank was already tapping the European Central Bank (ECB) for loans to the tune of €360m.

Worse, the exchange appears to indicate that Mr Quilligan wanted to simply deny the bank was tapping the support, rightly fearing it would be tainted even further. We know that international brokers who met with Anglo around this time came away convinced the bank was not accessing such emergency funds.

Anglo's reliance on the ECB eventually grew so great that it became a factor in the State needing a bailout in 2010.

Mr Bowe tells Mr Quilligan that back home the bank is being "bombarded with calls" from worried investors as Anglo's bonds and shares take a hammering.

The price of so-called "credit default swap" (CDS) that allowed investors to bet that Anglo was heading for a collapse was sky-rocketing.

CDS were little-known, even to most market watchers at the time, but the call reveals that investors who played in that market had already marked out Anglo as the second riskiest bet in the world – after UK lender Northern Rock. They would be proved wrong only because Lehman Brothers actually collapsed first.

In the chronology of the series of tapes leaked by the Irish Independent, this is by far the earliest.

The call reveals that the bank was in crisis long before the September 2008 guarantee, or even the so-called "St Patrick's Day massacre when Anglo shares plunged in March 2008.

It took place just four weeks before the bank announced an apparently glowing set of financial accounts and awarded its top 15 executives and directors a cool €9.6m for their success in 2007.

Irish Independent

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