Friday 23 February 2018

Bank guarantee night: 'At 3.30am we were told we were no longer needed' - former AIB boss

'I absolutely reject reference to reckless' - he said when asked about lending by the bank

Clodagh Sheehy and Ailish O'Hora

Bank bosses were dismissed four times from the government discussions on the night of the Bank Guarantee, former AIB Group Chief Executive Eugene Sheehy has told the Banking Inquiry.

Mr Sheehy, who was present on the night, said it was his understanding at all times that four pillar banks would be guaranteed and Anglo and Irish Nationwide banks would be nationalised.

His team had spent six hours in Government buildings that night and “ we were dismissed from the decision makers room on four occasions” during that time.

 "At 3.30am we were told we were no longer needed," he said. He added that he couldn't remember if the four-bank guarantee they had requested was a written one or not.

But he added that on the night, the bank did not have a solvency problem.

He also said he felt personal responsibility for the bank's failures.

"I would like to express my deep personal regret for my role in what occurred. I am keenly aware of the damage caused and this fact occupies my thoughts on a daily basis," the bank's former chief executive told the inquiry.

"We took too much risk in a sector that turned out to be toxic. I was CEO, I could have stopped it," Sheehy added, referring to its lending to property developers.

"That I failed in that responsibility is a matter of eternal shame."

He described how at a Board meeting of his own bank on the Sunday night ​before the bank guarantee meeting,​ the minutes show that they discussed the fact that the authorities expected two banks to fail  ​"​unless White Knights emerge" ​ and that four would be guaranteed.

Mr Sheehy said they ​had requested the meeting with Government and ​were dismissed while the actual introduction of the Guarantee was being discussed.

During the first session they had described what was happening in their business and had asked for a deposit guarantee.

In the second session they were told that “Anglo was about to default. The Government wanted us to give Anglo a loan to get them through the week so that an orderly liquidation/nationalisation could be organised over the following weekend.

“We refused and were asked to leave to reconsider our position” he added.

During the third session, said Mr Sheehy, they said they could give Anglo €5bn for one week and this was conditional on the Government guaranteeing this Anglo loan.

AIB said they would start moving assets to have the funds ready by Wednesday morning and the meeting then reverted to discussing the deposit guarantee and its form.

He said his bank wanted two years ​guarantee ​ rather than one and they were asked to leave while a drafting process was undertaken.

When they were called back for the fourth session  there was a short discussion about a solvency statement being issued with the guarantee.

“After discussion the government decided not to include that reference. We returned to our room and at 3.30am were told we were no longer needed.”

Mr Sheehy then described the shock of his team when they saw the guarantee document for the first time later that morning.

“We could not understand why Anglo and INBS were included. All our discussion that night were based upon the premise that Anglo was to be taken down and as such we did not think they would be part of the guarantee.

“In fact, we were at that time, in response to a government request risking our own liquidity to expedite Anglo’s liquidation that weekend.”

The former chief executive also told the inquiry that he had “failed” in his responsibilities during his tenure and this was “a matter for me of eternal regret”.

He wanted to say he was very sorry. He knew a lot of people were let down, felt very angry and rightly so.

“I take personal responsibility for my action”, he added.

When asked what 'Project Omega' was, he said it was a request by the then Minister for Finance that AIB would take over Anglo.

He said they rejected to the request.

"There was not detailed discussions," he added.

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