Banks get €7bn but Lenihan faces crisis
Minister admits he didn't tell Taoiseach,and didn't read report
FINANCE Minister Brian Lenihan last night pumped €7bn into the country's two biggest banks despite being badly damaged in a series of dramatic revelations.
The minister's competence and reputation were called into question after he admitted he had not fully read a crucial government report into the troubled banking system.
Last night he also disclosed that he did not inform Taoiseach Brian Cowen about a huge secret deposit at Anglo Irish, even when the Government took control of the bank last month.
His sensational admissions completely overshadowed the Government's €7bn injection of funds into AIB and Bank of Ireland.
The revelation compounded a nightmare day for the minister who earlier confessed to the Dail he had not fully read a crucial report which detailed the massive secret deposit in Anglo. Despite being badly damaged by the disclosures, Mr Lenihan dismissed calls for his resignation.
But opposition parties will certainly focus on his extraordinary admissions. These are that he had not fully read the banking report and that when its findings on loans to Anglo were made known to him he did not inform the Taoiseach or the rest of the Cabinet at the time of Anglo's nationalisation.
Mr Cowen only learned of the full details of the Anglo Irish bank loans over the last few days when it broke in the media. "It wasn't drawn to the attention of the Taoiseach," Mr Lenihan disclosed at a press conference following the Government's announcement of the €7bn injection into the country's two biggest banks.
Mr Cowen was "aware of corporate governance issues" with Anglo but nothing more, he revealed.
Mr Lenihan said last night he had not offered his resignation to the Taoiseach.
"We are battling for our stability -- calls for resignation in that context surprise me.
"No decision of the Government was affected in any way by the fact that I did not read page 129 of the report," he said.
The report was to form the cornerstone of Government consideration of how to address the emerging financial crisis.
Mr Lenihan said he had told the Taoiseach of concerns, but justified not revealing to him the scale of the deposit in Anglo Irish bank by Irish Life and Permanent because "this other issue was not in the public domain", and he had learned it under a form of privilege.
"There was an obligation on me not to disclose matters," he insisted.
The €7bn deposit made was equivalent to the total size of last night's recapitalisation.
Earlier in dramatic scenes in the Dail, he admitted:
- Details of the multi-billion loans were in an expert report he commissioned but did not read in full.
- Officials in his department knew about the deposits in October when they got the Pricewaterhouse Coopers report.
- They told the Financial Regulator to look into how Anglo's deposit base was boosted.
- However, they didn't tell him about the transactions until mid-January.
- He didn't tell his colleagues about the transactions.
Mr Lenihan last night he said he was "very disappointed" by the latest revelations at Anglo Irish. "The great danger is not a financial one. It is a reputational danger abroad," he said.
The political storm erupted as the Anglo Irish bank crisis deepened and it emerged a massive deposit was used to mask the financial institution's declining level of deposits during the autumn.
Amid unprecedented market turmoil at that time, a temporary €4bn transfer from Irish Life & Permanent into Anglo Irish Bank was recorded, in effect, as a deposit from a customer rather than as a loan from another bank.
The deposit was made at the end of last September and served to flatter the group's financial position as it closed its financial year.
As Mr Lenihan announced the recapitalisation of the country's two biggest banks AIB and Bank Of Ireland, he moved to distance himself from the earlier controversy.
He said he was taking this vital step "while the opposition in Leinster House is fixated with what page of a report I read".
The key points of the Government's €7bn investment include:
- €3.5bn in capital for Allied Irish Banks and Bank of Ireland.
- An 8pc return for the State on its shareholding.
- Power to appoint a quarter of directors to both banks.
- A quarter of the voting rights on board appointments.
- An immediate cut of one-third in the salaries of bank executives.
- A cut of a quarter in fees for non-executive directors.
- Extra loans for small businesses and first-time housebuyers.
- Protection for homeowners in arrears against repossession for a year.