Saturday 18 November 2017

Controls on loans to developers by AIB were not 'savage' enough - Banking Inquiry

Former Allied Irish Bank chairman Dermot Gleeson arrives at Leinster House in Dublin
Former Allied Irish Bank chairman Dermot Gleeson arrives at Leinster House in Dublin

By Clodagh Sheehy

Controls on loans to developers by AIB were not “savage” enough and “we have to take the blame”, the former AIB chairman Dermot Gleeson has told the Banking Inquiry.

Mr Gleeson said his bank had lent too much to individual developers and “there were decisions made in AIB which made things worse than they need have been for Irish citizens.”

He explained that many of the big property developers at the time were successful customers of the bank for 20-30 years who had always repaid their loans on time.

“I’m afraid we took too much comfort from that history," he said.

On one occasion AIB added €200m to a developer's borrowing who already had loans of €700m-€800m.

The bank would get top up requests that would suggest developers were getting into trouble, he added.

Mr Gleeson offered his “sincere regret” to the Irish people for his part in the banking crash.

The former Attorney General ,who was present in Government Buildings on the night of the Bank Guarantee, said his bank had asked that the guarantee be provided to four banks which did not include Anglo and Irish Nationwide.

The former bank chairman also said Finance Minister Brian Lenihan had told him that night that he would have preferred to wind down those two banks and that he was prepared to let them close.

Mr Gleeson would not be drawn, however,  on whether Mr Lenin was overruled.

Former Managing Director of AIB , Donal Forde, at Leinster House for the hearing of the Oireachtas banking inquiry today. Photo: Clodagh Kilcoyne
Former Managing Director of AIB , Donal Forde, at Leinster House for the hearing of the Oireachtas banking inquiry today. Photo: Clodagh Kilcoyne

Asked by Senator Marc MacSharry if Mr Lenin had discussed anything  else with him about the issue, Mr Gleeson said he did not.

AIB, he said, had  proposed the two banks be “decommissioned in some way” and the guarantee given to the remaining banks to protect them against inevitable turmoil from the liquidation or nationalisation Anglo and Irish Nationwide.

Mr Gleeson said he was not aware that all of the six main banks had been guaranteed when he left Government buildings in the early hours of September 30th 2008.

Read more: AIB did not want Anglo and Nationwide included in bank guarantee - ex chairman Gleeson

He became aware this had happened through media reports early the next morning.

The Bank representatives were not present in the room when the decisions were made.

The former Bank Chairman  said the decision to make so-called “blanket guarantee” to six banks was “not discussed with or raised with or by the representatives of AIB - or as far as I know, Bank of Ireland”.

Asked by Senator Susan O’Keeffe is he was surprised that NTMA team present at government buildings that night were never consulted, he responded “nothing would surprise me at this stage” but  “I was surprised, yes”.

Deputy Pearse Doherty questioned why AIB had paid out a €270m dividend to shareholders just three days before drafting the Bank Guarantee.

Mr Gleeson said the decision to do that had been made in June and approved by him “but it was undoubtedly a mistake”.

The decision was made in a bid to reassure the markets that “all was well at AIB.

Mr Gleeson told John Paul Phelan that during his time as AIB chairman “I did my level best in this job  and the outcome was entirely unsatisfactory”.

He absolutely accepted this and “I can never get away from it”.

Former managing director of AIB’s Republic of Ireland Division Donal Forde also agreed with Mr Gleeson’s suggestion that the ROI Division brought the bank down.

Mr Forde who was MD during the crash said  the remarks were “substantially true".

“The weight of the loans that ultimately cause problems did originate in our division” he said in response to questions from Deputy Eoghan Murphy.

He added not foreseeing the scale of the collapse was a “serious misjudgement on my part.”

He believed the failure of the Bank was primarily because of the failure of the Credit Policy.

The failing, he stressed, was “not at the level of individuals, but more fundamentally in the credit policy that we had adopted and the level of property related exposure in our portfolio.”

Asked by Deputy Joe Higgins about his own salary and bonus of €1.17m in 2004, Mr Forde said he accepted looking back the salaries seemed silly “but they didn’t at the time”.

He had job offers at that time for higher money. 

He said he had acted at all times in good conscience and good faith and “I am guilty of bad judgement but no more than that”.

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