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Saturday 25 November 2017

Anglo hid customers in meeting rooms to avoid risk of run on the bank

Peter Fitzgerald
Peter Fitzgerald

Clodagh Sheehy

Anglo Irish Bank staff ushered customers off the street and into back rooms to avert a run on the bank after the collapse in bank shares.

Peter Fitzgerald, former director of corporate and retail treasury at the bank, described the unprecedented rush to withdraw money when the shares of Anglo collapsed on St Patrick's Day in 2008.

"We were moving customers that called to our savings branches off the street and into meeting rooms in the back of the building," he told the Banking Inquiry.

He said this was done "to avoid precipitating a crisis by people seeing a queue outside the bank on St Stephen's Green".

He explained that the bank had to field thousands of phone calls from concerned customers and they ran the "very real risk" of not being able to deal with the volume of calls.

The short run on the bank lasted for about four days.

An announcement by the Financial Regulator of an investigation into short-term selling, he said, caused the share price to rise again.

After the announcement "the withdrawals abated and eventually stopped", he added.

Mr Fitzgerald said the collapse of Lehman Brothers six months later on September 15, 2008 was the "final event that shook the confidence of customers in the safety of their savings".

He added: "It is my view that the bank experienced a full-blown run on customer deposits from that period up to September 29, 2008."

Since most of the corporate and retail customers dealt with the bank by phone, however, he pointed out that "this run never fully manifested itself in the public domain".

Mr Fitzgerald told the Committee that in hindsight the business model of Anglo contributed to its downfall.

It meant that when global liquidity became a problem, the underlying structure of Anglo "compounded the stress to a much higher degree" than for other banks.

Anglo had been lauded by the markets as a highly profitable business model with spectacular balance sheet growth and was put forward as an example to competitors.

"It was difficult to perceive that everyone internally and externally could be so wrong" said the former director.

The Lehman's collapse in September of that year was "an incredibly stressful time for retail deposit customers in particular, many of whom still had all of their savings with the bank [Anglo]", added Mr Fitzgerald. It "brought a new level of uncertainty for the staff and management of the bank, and with the share price below 30c I believe most of the senior staff honestly felt the bank would not recover."

The announcement of the Bank Guarantee led to a "palpable" relief for management, staff, and customers, and an inflow of deposits in all of the funding operations of the bank.

Mr Fitzgerald was critical of the Financial Regulator in his evidence to the Banking Inquiry.

He said that the office of Financial Regulation "did not seem to have appreciated the growing funding risks in the bank in 2008 until right up to the point that the guarantee was warranted".

This was despite detailed information being sent to it daily by the risk function of Anglo throughout most of 2008.

Mr Fitzgerald said the bank knew in early September 2008 it would not survive.

He said this was his view based on conversations that were had where no answers could be provided. He fully accepted responsibility for his part in that failure and its consequences on the Irish State.

"It is something that I will always regret", he added.

Irish Independent

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