Wednesday 21 February 2018

Anglo business model was part of its downfall - former exec

Anglo Irish Bank
Anglo Irish Bank

The former former Director of Corporate and Retail Treasury, Peter Fitzgerald, has told the banking inquiry that in hindsight the business model of Anglo Irish Bank contributed to its downfall.

It meant that when global liquidity became a problem the underlying structure of Anglo “compounded the stress to a much higher degree” than for other banks.

He described how the collapse of Lehman Brothers on September 15th 2008 was the third of three major events which weakened customer confidence in Anglo - the collapse of Northern Rock Bank, then the Anglo share price and finally the collapse of Lehman.

Anglo had been lauded by the markets as a highly profitable business model with a spectacular balance sheet growth and put forward as an example to competitors.

“It was difficult to perceive that everyone internally and externally could be so wrong”.

The collapse of the Anglo share price in March of 2008 meant the bank ran the very real risk of branches around the country not being able to deal with calls from customers who wanted to close their accounts.

The Lehman’s collapse in September of that year was “an incredibly stressful time for Retail Deposit Customers in particular, many of whom still had all of their savings with the Bank”.

He said it “brought a new level of uncertainty for the staff and management of the Bank and with the share price now below 30c I believe most of the senior staff honestly felt the Bank would not recover.”

The announcement of  the Bank Guarantee led to a “palpable” relief for management staff and customers and an inflow of deposits in all of the funding operations of the Bank.

Mr Fitzgerald  was critical of the Financial Regulator and said the office of Financial Regulation “did not seem to have appreciated the growing funding risks in the Bank  in 2008 until right up to the point that the guarantee was warranted.”

This was despite detailed information being sent to it daily by the risk function of Anglo throughout most of 2008.

He believed that the “inherent weaknesses” in the Anglo model “ultimately contributed to the collapse and nationalisation of the Bank in 2009.

He fully accepted responsibility for his part in that failure and its consequences on the Irish State.

“It is something that I will always regret”, he added.

Asked by Deputy Kieran O'Donnell when he first became aware of Mr Sean Quinn's Contracts for Difference and Anglo Irish bank, Mr Fitzgerald sought a short adjournment so he could consult his own legal team.

He said he was concerned he might say something today that might be prejudicial in six months time.

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