Monday 9 December 2019

Anglo trial told industry norm was to try to make the bank look as good as possible on annual reporting days

Left to right, William McAteer, Denis Casey, John Bowe, and Peter Fitzpatrick
Left to right, William McAteer, Denis Casey, John Bowe, and Peter Fitzpatrick

Declan Brennan

The former head of Corporate Treasury at Anglo Irish Bank has told a trial that it was normal in the banking industry to try to make the bank look as good as possible on their annual reporting days.

Witness Brian Lynch told the trial of four senior bankers that the €7.2 billion “circular” cash transaction at the centre of an alleged conspiracy to mislead investors was neither typical nor usual.

Four men, including former Irish Life and Permanent (ILP) CEO Denis Casey and Anglo's former Head of Finance Willie McAteer, are accused of conspiring to mislead investors by using interbank loans to make Anglo appear €7.2 billion more valuable than it was.

Mr McAteer (65) of Greenrath, Tipperary Town, Co. Tipperary and Mr Casey (56), from Raheny, Dublin are on trial alongside Peter Fitzpatrick (63), from Malahide, Dublin, who had been ILP’s former director of finance and John Bowe (52), from Glasnevin in Dublin, who had been Anglo's head of capital markets .

They have all pleaded not guilty at Dublin Circuit Criminal Court to conspiring together and with others to mislead investors through financial transactions to make the bank appear €7.2 billion more valuable that it was between March 1st and September 30th, 2008.

On day 17 of the trial Mr Lynch told Brendan Grehan SC, defending Mr Fitzpatrick, that it was an “industry norm” for banks to manage their balance sheets “to look as good as possible” at the end of their financial year.

But he earlier told Úna Ní Raifeartaigh SC, prosecuting, that the deal between Anglo and Irish Life & Permanent (ILP) carried out in September 2008 was not typical.

“What’s unusual is that it is the same amount, for the same period, at the same rate,” he said, adding that the size of the transaction was also “significantly higher than normal”.

Mr Lynch described the cash transactions as “circular” and said he had become aware of the deal during Friday afternoon meetings in former Anglo chief executive David Drumm’s office in late summer 2008.

He explained that Anglo would give money to the banking arm of Irish Life in return for receiving money from Irish Life Assurance (ILA) in the same amount.

The reason for the transaction, he said, was that ILA was treated as a corporate deposit, so it would make the corporate deposit numbers better.

During cross examination by Diarmaid Guinness SC, for John Bowe, Mr Lynch said that Friday afternoon meetings held in Mr Drumm’s office were “specifically about the balance sheet, and what it would look like at the end of September”.

Mr Drumm was “very concerned” about funding initiatives for the financial year end, he agreed.

Counsel asked if anyone at the Friday meetings had suggested there was anything “improper” in the deal. Mr Lynch replied: “I don’t remember any specific comments”.

The witness said he had never been told to conceal the transaction from anyone in the bank, or the Regulator.

The jury heard that during September 2008 customers became “very nervous” in the midst of closures of banks in the UK and US and billions of euro were being withdrawn from the bank.

Mr McGuinness said: “Financial panic was everywhere in the world about banks. Banks were disappearing overnight. The survival of a bank was an entirely legitimate concern.”

Mr Lynch agreed this was correct and with counsel's submission that “thousands” of people worked in Anglo at the time.

Mr McGuinness said: “I would expect anyone, let alone a chief executive or other directors, to try and make projections for how they might protect the existence of the bank, its assets, the shareholders and the viability of the bank, isn’t that right?” Mr Lynch agreed.

Steven Hiles, former market risk analyst with Anglo, told Ms Ní Raifeartaigh that he felt that funding initiatives discussed at the Friday meetings were purely about improving corporate deposit figures – and not about long term funding or liquidity, which is the bank’s cash flow.

He said he and a colleague had asked Mr McAteer if he was aware of this.

“We felt that given the situation and financial crisis it would have been better for the bank if we were looking at liquidity,” Mr Hiles said. He told the trial that Mr McAteer told him that he was aware of this.

The trial will continue on Monday before Judge Martin Nolan and a jury.

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