Tapes reveal our banks 'getting laughed at' by markets in 2007
IRELAND'S banks and economy were "getting laughed at" by international money markets in late 2007 as the country headed for financial disaster, the latest Anglo Tapes reveal.
The revelations show the international financial community did not believe the spin coming out from Ireland that the foundations of the economy, banks and property market were sound.
Around that time, then Finance Minister Brian Cowen was describing the economic slowdown that had begun as an "impressively soft landing" for the economy at the tail-end of the Celtic Tiger period.
But crisis-ridden Anglo Irish Bank was desperately looking for a reputable endorsement of their financial position to answer the mounting question marks over the bank.
Bank chiefs believed markets would not find a reference from an Irish firm credible because of a perception that the "f***in' Irish are clubbing together".
"That actually makes it worse. It looks like we met them in the pub," a senior executive says.
Declan Quilligan, the head of Anglo's UK operation, revealed the big players in the markets didn't believe the Irish banks understood what was happening in the economy.
He complained to the bank's then acting Head of Treasury, John Bowe, that investors in London would not heed any claims from Irish analysts about the state of the Irish economy.
"Even when we talk about the Irish economy, we get laughed at ... AIB do too and Bank of Ireland do too. We're always getting f***in' laughed at ... we're in denial and...." Mr Quilligan says.
The latest revelations show that in November 2007, 10 months before the bank guarantee, Anglo bosses knew there were widespread rumours about their financial status.
Although they are dismissive of the "whispers" reflecting their real position, Mr Bowe also reveals the bank had lost €800m in corporate deposits the previous day alone.
"Now, that was the cash flow so I am not terribly worried about that. Maybe there was a bit of that ... but I don't think anybody was taking their money out because they were worried about us. I think that that was pure cash flow," he says.
By September 2008, up to €1.5bn was being taken out of the bank each day as nervous investors pulled the plug.
The 40-minute phone call reveals the startling fact that the bank was barely surviving from week to week while, at the same time, their glowing end-of-year report claimed Anglo had made profits of over €1bn in 2007.
Yet the market didn't attach any credibility to the word coming out of Ireland, with banks being "laughed at".
The Anglo executives openly discuss what strategy to adopt to boost their market perception as they were getting calls from other banks asking if everything was alright.
Getting an Irish firm of financial advisers to testify to their stability is ruled out, as "some international influencers" are required.
Mr Bowe phoned Mr Quilligan at his office in London to discuss fears that Anglo was in real danger as international investors pulled money from its bonds and shares, and had begun betting in the credit default market that the bank was heading for default.
On Saturday, we revealed how the executives at the toxic bank knew that it was headed for a crash – but were desperate to keep it hidden from investors.
The latest Anglo Tapes reveal the executives admitting that the bank breached rating agency limits in order to borrow €500m before things got even worse.
As the bank's share price plummeted, they expressed the fear that big corporate depositors could pull €10bn from Anglo in late 2007, and discussed denying the bank's reliance on the European Central Bank for €360m of loans, if they were asked.
In the phone call, Mr Quilligan and Mr Bowe ponder how to get a positive spin about the bank out into the market – in a desperate bid to halt the dramatic slide in the share price and soothe investor concerns.
Mr Quilligan suggested Anglo needed to get "international" analysts on their side to change the negative sentiment towards the bank on the global markets.
But the London-based senior executive and board member revealed there was no point in using Irish analysts to get the message out because they wouldn't be believed.
When Mr Bowe mentions a company of Irish financial advisers, Mr Quilligan replies: "No, they're Irish ... they'd say f***in' Irish are clubbing together now ... We need international though, John, I think. The Irish guys are f***in' ... That actually makes it worse. It looks like we met them in the pub ... And it's seen that way, you know."
Mr Bowe reveals he had been taking calls from international banks and brokers who were concerned Anglo was in trouble.
"Barclays Bank rang this morning and said: 'Is everything alright, John?' - at a very senior level - 'Is everything alright John?'. And I said: 'Yeah'. They said: 'Look, there's just a lot out there'.
"And I said: 'Look I can't really tell you why it's out there. You're probably closer to the market than we are, but what I can tell is, within the bank and within what we tell you, things haven't changed. The two billion re-po deal we're doing will only add another blanket on to it, it's not there to replace.
"'And, by the way, I am over in London next week, I am happy to call in and talk to your senior credit people.'
"You know, so, that's being very upfront ... ," he says.