Saturday 16 December 2017

The call that exposes Anglo's rotten culture

Recording reveals the astonishing goings-on at Anglo in run-up to the bank guarantee. Paul Williams reports

Paul Williams

THE Anglo phone recording provides a rare glimpse into the astonishing manoeuvrings going on behind the scenes in the toxic bank in the weeks before it helped break a nation.

Two senior executives are heard joking as one of them outlines to the other a strategy that would ultimately pull the State into the financial abyss with them.

The conversation was recorded shortly after the publication of Bank of Ireland's badly received trading statement on September 17, 2008, which was a mere two days after global financial services giant Lehman Brothers filed for bankruptcy.

The Irish Independent has decided to publish the content of the phone call in the public interest as it exposes Anglo's strategy, which eventually paid off – and cost the taxpayer €30bn in the process.

If the Government ever gets around to establishing a properly constituted public inquiry into the banking scandal – it is now five years since the crash – the Anglo tapes should provide helpful evidence.

From the Anglo tape, it appears executives at the floundering bank embarked on a cynical exercise to dupe the Central Bank, playing down the true extent of their cash crisis at a meeting in September 2008 – just two weeks before the Government's bank guarantee was put in place.

Their strategy was to "pull them in" by panicking the Central Bank into loaning them an initial €7bn, which would leave it in a position where they would have no choice but to continue supporting Anglo to protect its investment.

John Bowe summed it up when he explained the drip-feed of funds from the Central Bank "could creep up" over time. He says he "basically kind of gave it to them (Central Bank) between the eyes", and admitted that Anglo was "playing ducks and drakes with the regulations".

The bank desperately needed an injection of cash to artificially boost its balance sheet before the September 30 deadline for its annual financial statement.

Panicky depositors were pulling money out at the rate of €1bn a day and the share price was in freefall. Mr Bowe says they wanted to "buy time" in the forlorn hope that they could rebuild liquidity from the bank's loan book and "stabilise" or find white-knight investors.

But it is probably his description of how he arrived at the €7bn loan figure requested from the Central Bank that will infuriate taxpayers most – "I picked it out of my arse."

At the time, he was one of the top executives at Anglo, earning an annual salary of around €300,000. He was the Head of Capital Markets as well as the acting Director of Treasury – his appointment was confirmed three months later.

When Anglo became the Irish Bank Resolution Corporation in 2010, he was promoted to Director of Corporate Development.

When approached by the Irish Independent, Mr Bowe claimed the comments were "off the cuff" and "probably gallows humour". However, he refused to explain his comments and denied that there was a strategy to deceive.

In the phone call, Mr Bowe reveals that the bank's CEO David Drumm was desperate to impress upon the Central Bank and the Government what was at stake if they allowed Anglo to go bust.

He informs Peter Fitzgerald that "Drummer" was "getting into the political ear" and was planning a number of meetings with ministers in the Fianna Fail-led Government the following weekend.

Mr Bowe also revealed that a major cash injection of billions would merely "buy us up to our year-end results . . . max". These results were due in two weeks' time.

Mr Bowe says: "So if you were thinking maybe Drummer was getting frustrated that he wasn't getting attention and things were going nowhere, well, we've sort of sorted that out.

"I think what's getting traction is the meetings (with the Central Bank and Financial Regulator) yesterday ... that's the bit that's reverberating up.

"I think they know it's real and it's material ... and there's something that needs to be discussed." Peter Fitzgerald then asks Mr Bowe: "Will it happen?"

Mr Bowe: "Well, it has to happen. It has to happen because if it doesn't we're going to hit a wall in the next week ... we're already in breach (of financial regulations)."

He describes the reaction of Central Bank officials to the loan request and what the Anglo executives then told them.

Mr Bowe (mimicking officials): "There was a bit of, 'Jesus, that's a lot of dosh ... Jesus, f***ing hell and God ... well you know that the Central Bank only has €14bn of total investments that would be going up 20 ... gee ... that would be seen.

"'How would we do that? We would need to give you ... we need to ... Jesus, you're kind of asking us to play ducks and drakes with the regulations' and we said: 'Yeah'.

"We say, 'look, what we are telling you is that if we get into difficulties, we have 100,000-plus lump-sum depositors in Ireland, all of whom would be very local.'

"And I said, 'take it that the other Irish banks will not be able to raise any wholesale funding for how long you want'. So, I said, 'Bank of Ireland, their balance sheet is €200bn and 45pc of that is wholesale, so, let's call that €90bn and let's say that 60pc of that is rolling in the next 12 months, so that's €54bn – take it that that won't roll'. And I said, 'you can also do a similar sum for Allied and Irish Permanent'. So I said, 'that's what is at stake, because these guys, even though they are big in our world, are minnows in the outside world.'

"So I said, 'that's what you are protecting'. And I said, 'you have to ... '

"So anyway, that sort of got everybody's attention."

Mr Bowe then describes their discussions with the Financial Regulator at the time, Pat Neary and another regulatory official.

He tells Mr Fitzgerald: "And then we had Pat Neary coming in and (the other official) saying (mimicking the official), 'C'mere lads, I just want to have a word with ya ... yeah Jesus ... so look, c'mere, have you actually got any decent assets that you can put in play? Is there stuff there, like, that has value? And look lads, you know, if you're going for this now, make sure whatever you get sorts it out, okay?'"

Mr Fitzgerald: "What do you mean 'whatever you get sorts it out'?"

Mr Bowe: "In other words, whatever you get from the regulator sorts out the issue."

Mr Fitzgerald: "Oh yeah, yeah ... just makes it f***in' happen ... don't f**k it up."

Mr Bowe: "Don't be coming back."

Irish Independent

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