Wednesday 13 November 2019

AG warns against full public banking inquiry

Fionnan Sheahan, Joe Brennan and Dearbhail McDonald

THE Government has got strong legal advice that a full public inquiry into the banking crisis would potentially jeopardise any court cases against bankers.

A mixture of a private and public investigation is emerging as the most likely outcome of this morning's cabinet discussion on the matter.

Green Party ministers are set to press for a greater public element to the inquiry, within the Oireachtas, in a showdown with their Fianna Fail counterparts today, with the credibility of the junior coalition partners being called into question.

Government sources indicated there may be a commission of investigation set up, to operate in conjunction with an Oireachtas committee and there would be some public hearings.

But it is understood that legal advice from the Attorney General's office warns against a full public inquiry to avoid undermining ongoing probes by the garda fraud squad and the Director of Corporate Enforcement into Anglo Irish bank.

Concerns are also being expressed within government circles about the possible damage to the banking system by a full public inquiry. "All of these issues now go on the page. It's all to play for," a source said.

But the palpable anger of the public at the consequences of the banking crisis is the driving force behind the calls for a mainly public inquiry.

Whether there is enough of a public element to match the Greens' insistence that the inquiry cannot be conducted behind closed doors, as Fianna Fail would prefer, is the key.

Finance Minister Brian Lenihan will outline the format for the investigation this afternoon, when the Dail resumes following the Christmas break.

Taoiseach Brian Cowen would avoid a public grilling over his supervision of the banking sector as Finance Minister if the proposals for a secret inquiry were adopted.

Labour Party leader Eamon Gilmore warned the decision on the inquiry was a vital test for the Greens.


"Anything short of a full and comprehensive inquiry carried out in public, under the direction of an Oireachtas committee will destroy what ever remaining shred of credibility the Greens still have," he said.

Mr Cowen and Green Party leader, Environment Minister John Gormley, met for 50 minutes in Government Buildings yesterday. Among the topics for discussion was the proposed banking inquiry.

Afterwards, the Green Party's spokesman said some progress was made and the proposal would be brought to Cabinet.

Mr Cowen's spokesman also said the banking inquiry issue would now be going to Cabinet for a decision. The banking inquiry decision comes as the head of the country's Commercial Court said he it was "astonishing" that more than €500m in unpaid loans extended to five companies controlled by developer Liam Carroll was secured on a "fairly fragile" form of security.

It emerged yesterday that the security obtained by the bank for loans totalling €550m was in the form of a solicitor's letter of undertaking and the deposit of title deeds.

High Court Judge Mr Justice Peter Kelly described the form of security as fairly fragile and said the arrangement was "a far cry from a legal mortgage".

Yesterday AIB sought to protect its loans by securing "well charging orders" over various lands and properties owned by the developer's companies.

It granted the loans by way of an equitable mortgage, rather than a legal mortgage.

An equitable mortgage is widely perceived to be a weaker form of security for a bank loan.

And draft figures obtained from the High Court reveal a record number of possession cases are expected to go before the High Court this year.

More than 970 new applications for possession orders were made last year compared to 758 in 2008 and 374 in 2007.

The main banks privately fear that negative news coming from a public inquiry in the near-term could spook investors at a time when they are looking to raise billions of euro to rebuild their balance sheets.

It is understood the two main banks have not been asked for, nor given, their views to Government on an inquiry.

"It could prove counterproductive to do so," said one source.

Last week, Bank of Ireland chairman Pat Molloy batted back calls from shareholders for his view on a public inquiry into how the sector was brought to the brink of collapse, saying: "We clearly see that as a matter for the Government, but if there is an inquiry, of course we will co-operate with it fully."

Allied Irish Banks' Dan O'Connor was similarly coy at that group's extraordinary general meeting just before Christmas.

Meanwhile, a senior banking source said: "Most of the people who would contribute most meaningfully to a banking inquiry are no longer working in the sector. Any probe would be pointless if an inquiry wasn't able to call these guys in."

Carroll back in court, p14 Fionnan sheahan, P27

Irish Independent

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