Concerns over AIB solvency raised in 2009, inquiry told
Concerns about the solvency of AIB were raised with the Government in 2009, a former auditor of the bank has told the Banking Inquiry.
Paul Dobey, who was lead partner for KPMG on the bank’s audit, said the auditors had “significant concerns” in relation to both the liquidity and the solvency of AIB in its 2008 audit.
He said they had spoken to the deputy governor of the Central Bank about the availability of emergency liquidity assistance and “we got assurances in relation to that matter”.
They were also concerned about the capital of the bank and its solvency. While the Government had agreed to put €3.5bn of capital into the bank, “we weren’t sure if that was enough”.
They then spoke to a Department of Finance official to get assurances that “if more capital was required, it would be made available”.
Mr Dobey and Terence O’Rourke, former managing partner with KPMG, said their company had drawn the bank’s attention to the risks associated with property lending.
It was clear the institution was aware of the risks but also clear “they did not anticipate the potential scale of these risks and the resulting losses that would ultimately arise”, the auditors said.
AIB received a total State bailout of €21bn after the financial crash.
Mr Dobey stressed that audits provided by KPMG related to the “true and fair view” given by the bank’s financial statements. They did not address the effectiveness of how management or the board conducted affairs, or the bank’s risk appetite.
“We are not inept; we did a very high-quality audit of AIB, I can assure you of that,” said Mr O’Rourke.
Mr Dobey said accountancy rules did not contribute to the crisis – but lessons could be learned. In response to questions from chairman Ciaran Lynch, he compared the role of an auditor to that of a “scorekeeper”.
“I don’t think you can blame the scorekeepers for the performance of the team,” he said.Mo iae nius imorsum