Tuesday 22 October 2019

Fresh questions over Drumm's public statements on bank's finances

The Anglo Tapes team: from left, Paul Williams, Dearbhail McDonald, Fionnan Sheahan and Donal O’Donovan
The Anglo Tapes team: from left, Paul Williams, Dearbhail McDonald, Fionnan Sheahan and Donal O’Donovan
Donal O'Donovan

Donal O'Donovan

FRESH questions have been raised about public declarations by then chief executive David Drumm that Anglo Irish Bank was solvent and profitable in late 2008, after the Irish Independent published the Anglo Tapes.

On December 3, 2008, Anglo Irish Bank published a preliminary annual report that said the bank had been profitable in the year to the end of the previous September.

The report said Anglo had conservatively set aside more cash than required to cope with any losses on bad loans.

That report was issued to the Irish Stock Exchange at a time when investors were still buying and selling the bank's shares.

However, a recorded conversation between Mr Drumm and the then Head of Capital Markets at Anglo, John Bowe, two months earlier, in October 2008, showed that the bank's most senior executive was desperate to shore up the bank.

They were aggressively seeking to attract customer deposits from the UK and Germany, even at the risk of abusing the terms of the bank guarantee.

If the then bank chief executive's stated opinion differed from his true understanding at the time, it could leave him open to legal action.

Issuing a misleading statement to the Irish Stock Exchange, or in relation to a bank whose shares are traded on the exchange, is an offence under Ireland's market abuse law.

Recordings of a a separate call revealed that Mr Bowe was involved in efforts to secure €7bn emergency loan from the Central Bank for Anglo Irish Bank on the previous September 17, apparently in the knowledge that the bank would never be able to repay the debt and faced nationalisation.

That suggests at least some senior figures believed the bank's a short-term "liquidity" or cash flow problem was more fundamental than that.

That view was revealed in recorded conversation between Mr Bowe and the bank's then Director of Retail business Peter Fitzgerald on September 18 that year. Mr Bowe had been involved in negotiations with the Central Bank. Mr Fitzgerald had not been involved in the negotiations and has confirmed that he was unaware of any strategy or intention to mislead the authorities. Mr Bowe denies misleading the Central Bank.

The apparently desperate situation inside Anglo revealed by the recordings of private telephone conversations appears to fly in the face of the stated position of the bank – including that it made a profit of €784m in the year to September 30 2008.

On December 3, 2008, Anglo executives told reporters that the bank lost €4bn of deposits during the previous September but attracted €6bn in deposits following the introduction of the state's bank guarantee.

Irish Independent

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