Monday 26 February 2018

Tense relations between IBRC and Finance Department in 2012 come as no surprise

The bank refused to cut salaries in April 2012, following a request made by Michael Noonan to the IBRC board
The bank refused to cut salaries in April 2012, following a request made by Michael Noonan to the IBRC board
Donal O'Donovan

Donal O'Donovan

The emergence of correspondence between senior figures at the Department of Finance and the Irish Bank Resolution Corporation (IBRC) throws new light on tensions that were already fairly obvious at the time.

Throughout 2012 it was clear that views of members of the Government and the Department of Finance diverged significantly from those IBRCs board and top management - all of whom had been brought to help clean up the former Anglo Irish Bank.

Pay: Pay at IBRC was a fraught issue through much of 2012. We know the bank refused to cut salaries in April that year, following a request made by Michael Noonan to the IBRC board.

Other banks and the National Treasury Management Agency (NTMA) took pay cuts, but IBRC's board held firm on the issue - arguing that slashing pay for the mostly foreign bankers who had joined after the banking collapse would hurt efforts to right the ship.

Michael Noonan backed down, but politically the issue refused to die away, causing difficulties for the Government when it emerged in November 2012 that six executives at IBRC bank were each earning over €500,000 a year.

Culture: The dispute around pay was symptomatic of a deeper, cultural gulf between the Department of Finance and the bank.

Read more: Coalition probes Siteserv sale as expert defends controversial €45m deal

That was reflected in the slow hammering out of a formal framework agreement establishing the parameters of the relationship between IBRC and the Department of Finance.

We know the bank pushed hard to retain its operational independence, arguing on pragmatic grounds that executives and the IBRC board needed clear lines of responsibility in order to achieve results.

Multiple drafts went back and forth before a framework deal was finally struck. That cannot have helped relations between the two sides but in many ways reflected a healthy willingness to acknowledge tensions when they arose.

Transactions: The Government was in the tough position in 2012, seen by the public as responsible even for banking deals being done at arms length by IBRC.

In February 2012, it was reported that IBRC had agreed to let TV3's owner Doughty Hanson park interest repayments on an €80m loan until the TV network was sold. The deal was done in a commercial basis, but any easing of debts for commercial borrowers could be seen as controversial at the time.

The sale of Siteserv, including the €5m payment to shareholders, hit the headlines in March 2012.

Irish Independent

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