Monday 20 November 2017

Banking Inquiry: Anglo CEO Drumm and Financial Regulator Neary's 'informal' meeting to discuss Sean Quinn's financial position

Witness Former financial regulator Patrick Neary
Witness Former financial regulator Patrick Neary
Patrick Neary retired as chief executive of the Financial Services Regulatory Authority in 2009
Patrick Neary, the former Financial Regulator
Former Financial Regulator Patrick Neary, pictured last night. Picture: Arthur Carron
Ex-regulator Pat Neary. Photo: Collins

Clodagh Sheehy

Anglo CEO David Drumm sought an 'informal' meeting with Financial Regulator Patrick Neary to discuss businessman Sean Quinn’s financial position, Mr Neary has told the Banking Inquiry.

He said the meeting took place some time in September 2007 and that Mr Drumm “came to me and asked me if I knew anything about Contracts for Difference(CFDs)".

Mr Neary said Mr Drumm suggested there were 'rumours out there' about Mr Quinn and CFDs.

The former financial regulator stressed that the meeting was 'informal' and that he and Mr Drumm had agreed to both make further inquiries but nothing had emerged.

Fianna Fail Deputy Michael McGrath asked Mr Neary if he had taken 'adequate steps' to get to the 'bottom of it' since he had the CEO of a bank in his office bringing to his attention.

Mr Neary responded that he had made some inquiries with colleagues but there was 'nothing other than rumours' until the facts were established in March 2008.

He agreed he had met Mr Quinn in January of 2008 and raised the issue.  He said Mr Quinn said he had 'a small CFD position'.

Mr Neary 'took that to mean' that whatever CFDs Mr Quinn had, he had.

Former Financial Regulator Patrick Neary also told the Banking lnquiry that supervision by the Financial Regulatory Authority was not sufficient to meet the challenges posed by the banking crisis and he was “deeply sorry”.

Stressing that the Financial Regulator was not a single individual but an Authority, Mr Neary said however that “primary responsibility resided with the banks themselves”.

They were “best placed of all to assess their own risks and business models, to strike the right balance between their risk and reward and have skilled, responsible people in place.”

Mr Neary insisted that the Authority did not have the mix of skills necessary for a more intrusive style of supervision.

The difficulty of attracting staff with experience and the rapid pace of new directives had stretched existing staff to the limit so “the capacity to react to the unfolding crisis was made more difficult”.

Witness Former financial regulator Patrick Neary
Witness Former financial regulator Patrick Neary

He accepted that the Authority could have had more regard to the systemic risk that was accumulating in the banking sector”.

The former chief executive officer of the Irish Financial Services Regulatory Authority stressed that the Authority relied on the Central Bank’s work on financial stability to identify, monitor and assess risks and to be proactive in providing a choice of possible remedies.

Read more here: Banking Inquiry: Former Central Bank director says Quinn Group was not a factor in the Bank Guarantee 

“In hindsight, this approach was flawed and I believe now, that a clearer, more direct and specific allocation of responsibility for the oversight of financial stability within the organisational structure of the Central Bank would have been more appropriate.”

In relation to residential property, said Mr Neary, the Authority’s decision reflected forecasts from the Central Bank “which it was obliged to follow” and these “predicted a soft landing”

“If that prediction had been fulfilled, there would not have been a banking crisis,” he stressed.

On the night of the Bank Guarantee, Mr Neary said he and the Chairman of the Authority advised the first meeting at government buildings that on the basis of their information all banks were in a position to meet their obligations on a going concern.

Read more here: Nationalisation of Anglo 'might have been viewed more negatively than guarantee' 

Liquidity, however, “was becoming a critical issue for them, especially Anglo”.

At a second meeting later that night “The Chairman and I expressed the view that if a guarantee was going to be put in place, we would be inclined to favour it being extended to cover the depositors in all banks concerned in the same manner.”

He returned to his Dame Street office around 3am on the morning of September 30th 2008 and I returned to my office in Dame Street around 3am on the morning of the 30th September 2008.

 “I made phonecalls to representatives of Irish Life and Permanent, EBS Building Society and Irish Nationwide Building Society to advise them of the Government decision. I tried but was unable to make contact with representatives of Anglo Irish Bank.”

Mr Neary added: “The effects of the guarantee were evident immediately. “

It was “viewed positively by market commentators and was seen as addressing satisfactorily the concerns of depositors and thus the funding and liquidity difficulties that had been affecting the banks.”

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