Business Irish

Wednesday 21 February 2018

Irish Life and the curious green jersey-agenda puzzle

WHEN former IL&P chief executive Denis Casey was forced to quit over the Anglo deposits affair in February 2009, sources close to the company claimed that its actions were part of a "green jersey agenda", under which the Irish-owned banks agreed to support one another with the tacit agreement of government and officials.

The existence of such an officially sanctioned support scheme has always been vehemently denied by ministers and officials.

However, some of the official documents released to the Dail's Public Accounts Committee last week seem to suggest that the green jersey agenda may not have been entirely a figment of IL&P's imagination. On May 7, 2008, William Beausang, a civil servant at the Department of Finance, prepared a briefing document on financial stability issues for the new Minister for Finance Brian Lenihan. After outlining the difficulties the Irish banks were experiencing in securing funding in the aftermath of the August 2007 credit crunch, the briefing document went on to state that: "The Central Bank is liaising with the major domestic banks at CEO level to explore the options that may be available for mutual support between the Irish banks in a crisis situation and to respond to any problem in small institutions in a collaborative fashion."

Then on September 22, as the crisis at Anglo was coming to a head, a meeting of several officials took place. It was attended by Beausang and another civil servant from the Department of Finance, Kevin Cardiff (who has since become secretary general of the department), John Corrigan and Oliver Whelan from the NTMA and Tony Grimes from the Central Bank.

In the official note of the meeting, which was headed "Liquidity and how to provide a 'war chest'", Grimes is quoted as saying that: "Strong view at CBFSAI [Central Bank and Financial Services Authority of Ireland] board on 21/9 that liquidity pool of authorities needs to be bigger and we need to look again at this -- Anglo already requesting seven billion facilities, and want to activate a swap with CB [Central Bank], who will not do so unless absolutely necessary."

This was followed two days later by a meeting between the Anglo boss David Drumm, Anglo's finance director Willie McAteer and the then Financial Regulator Paddy Neary. According to Anglo's record of the meeting, McAteer told Neary that the bank would be "managing" its balance sheet in the run-up to its September 3 year end; to which, according to the Anglo record, Neary replied: "Fair play to you, Willie." Anglo's version of events has been strongly disputed by the Financial Regulator's office.

What isn't in dispute is that on five separate occasions between September 26 and September 28, 2008, IL&P's Irish Life Assurance subsidiary advanced a total of €3.35bn to Anglo and that, on September 30, 2008, after the Government had unconditionally guaranteed the deposits of the Irish-owned banks, IL&P advanced a further €4bn, to bring the total to €7.35bn. By getting IL&P to route the money through ILA, Anglo was able to dress up these advances as customer rather than inter-bank deposits. This had the effect of making Anglo's balance sheet look much stronger than it really was.

While the documents published last week don't definitively prove the existence of the green jersey agenda, they certainly provide circumstantial evidence to support such a contention.

Was there in fact a green jersey agenda?

Both the PAC and the Commission of Investigation into the banking sector need to provide convincing answers to this question.

Sunday Independent

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