Business World

Wednesday 21 February 2018

Britain knew Anglo would be bailed out before we did

Regulator tipped off UK government in advance

DEFICIT OF DEMOCRACY: Brians Lenihan and Cowen in 2008
DEFICIT OF DEMOCRACY: Brians Lenihan and Cowen in 2008

The British government knew before the Irish Cabinet that the State would not allow Anglo Irish Bank to fail and was prepared to pump billions into it to keep it afloat.

On September 29, 2008 – the day of Ireland's blanket guarantee – Ireland's financial regulator reassured the UK that "the Central Bank/ Government would support" Anglo. This is according to newly released files from HM Treasury, Britain's financial and economic ministry.

The documents reveal that the Financial Regulator tipped off Britain that Anglo might be "unable to roll €3bn [in funding] overnight," but not to worry as if that happened the Central Bank or Government would step in to bail it out.

An internal email entitled 'Iceland and Ireland' and dated September 29, 2008, states that Britain's Financial Service Authority was "most concerned about Anglo Irish".

"The FSA talked to the Irish regulator today, who also share concern on the heavy reliance the bank [Anglo] has on corporate deposits," the email, released under Britain's Freedom of Information Act, states.

"The Irish regulator is in close contact with the firm. If the liquidity conditions worsened for them, and if they were unable to roll €3bn overnight, then they would have to access liquidity from the Central Bank or government," the documents state.

Ireland's Financial Regulator insisted to Britain that Anglo is "not seen as standing out from the others [AIB, Bank of Ireland, etc]".

The Central Bank's fears about Anglo do not seem to have reached Minister for Finance Brian Lenihan until much later in the day on September 29.

According to the guest sign-in book of the Department of Finance, at 3pm Mr Lenihan met with the Irish Creamery Milk Suppliers Association; then at 4pm he met various charities, including Protestant Aid and the Children's Rights Alliance. Meetings then took place with the Irish Congress of Trade Unions for a few hours.

It was only at 5pm that Padraig O'Riordan of Arthur Cox, a key adviser to the State in the financial crisis, showed up, which led to a series of frantic meetings that cumulated early the following morning with the Government holding a rushed cabinet meeting, where ministers were woken from the beds to agree to blanket-guarantee the banks.

By October 21, 2008, just three weeks after the bank guarantee, HM Treasury had seen through Ireland's bluff when it blanket-guaranteed the entire liabilities of its banks.

In a note entitled 'Global economic situation', Britain's powerful financial ministry concluded that "On the retail side Bank of Ireland and Allied Irish [Banks] are also significant, as people start to question whether the Irish can afford the guarantee they have put in place."

Anglo Irish Bank, Britain noted, was "finding it difficult" to convince anyone in the market to leave funds on deposit with the bank for longer than two weeks – such was the fear it would collapse.

Nonetheless, HM Treasury said Anglo's "credit quality is okay".

Just what Britain knew about Ireland's financial crisis remains largely censored – even five years after the blanket guarantee that bankrupted the country.

The Information Rights Unit of HM Treasury refused to release to the Sunday Independent numerous documents, which took it four months to compile.

"We believe that disclosure would inhibit the frankness and candour of policy discussions," Wendy Randall of HM Treasury's Information Rights Unit said.

"It would not be in the public interest to inhibit ministers' ability to take views and discuss issues relating to ongoing policy options," she continued.

She said that as a result she could not even disclose any detail on the documents being held back by Britain about Ireland's citizen-funded economic collapse.

Unlike Ireland, one of the few countries who charge substantial fees for freedom of information, at least HM Treasury did not charge the Sunday Independent anything for the information it could release.


Vinnie O'Dowd  and Tom Lyons

Sunday Independent

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