Tuesday 24 April 2018

'Rumours about Quinn complicated lender's position'

Matt Moran
Matt Moran

Clodagh Sheehy

Businessman Sean Quinn's contracts for difference (CFDs) with Anglo Irish Bank were among the "factors that seriously compounded the risks" for the lender, the Banking Inquiry was told.

Gary McGann, who was a non-executive director from 2004-2009, said the build-up of the Quinn CFDs and then the worldwide liquidity collapse had compounded the risks.

Mr McGann stressed that the Financial Regulator routinely had reports from the bank - and that it was fully briefed from the outset on the Quinn CFDs and the bank's efforts to deal with them.

"I was aware that there were significant exchanges with the regulator during the Quinn CFD period.

"If the regulator had wanted to bring any matter of concern to the board's attention, my expectation was that he could have written to the chairman or senior independent director and it could have been dealt with promptly."

In response to a question from Deputy Kieran O'Donnell, he said he did not agree that the CFDs were a catalyst but they were certainly a "strong" factor in the bank's demise.

Mr McGann stressed that "looking back, the bank misjudged the risks that built up in the expansion of lending, particularly property lending, in the years up to 2009".

He explained how it was clear in hindsight that accounting standards, as well as many other factors, did not help in identifying and reporting on risks.

He said that on the night of the bank guarantee, he believed they were dealing with a liquidity issue but at no time did they believe they were dealing with a solvency issue.

As the crisis deepened from autumn 2008, "the inability under accounting standards to properly reflect the belief of management and the board" about provision for bad and doubtful debts added to the bank's problems, said Mr McGann.

He told the inquiry: "I did the job I was meant to do to the best of my ability. I gave it as much effort as I could and the fact that it has ended up the way it did is a matter of serious regret to me, but I don't feel that I short-changed the business or the shareholders or the staff."

Asked by chairman Ciaran Lynch if he considered his decision to join Anglo was good or a mistake, he replied: "On a human level, I'd be a happier man if I hadn't been there, but given that I chose to accept the offer, I did my best."

Matt Moran, former chief financial officer at Anglo, appeared later in the day and said the bank's position was complicated by the rumours of Sean Quinn's economic interest.

"Some market participants believed that Quinn was under financial pressure. If true, they could seek to exploit his weakness by driving the bank's share price lower."

He explained that through selling short the shares, it placed immediate downward pressure on the price, which then caused other investors to sell, further weakening prices and creating a negative spiral.

Volatility in the share price meant certain funders were less willing to provide deposits.

All of this put the focus of management on liquidity and solvency "became a serious issue on a more gradual basis" after that.

Irish Independent

Today's news headlines, directly to your inbox every morning.

Editor's Choice

Also in Irish News