Davy sale to Bank of Ireland 'doesn't end the controversy'

Bank chiefs will be questioned by an Oireachtas committee in the next Dáil term
Davy sale to Bank of Ireland 'doesn't end the controversy'

Bank of Ireland is buying back the bulk of the scandal-hit Davy stockbroker.  File picture: Gareth Chaney/Collins

There are still many questions for Davy, the Central Bank, and its new owner about a 2014 deal, remarked John McGuinness TD, the chair of the Oireachtas finance committee, as the bulk of the broker was sold to Bank of Ireland.

Under the sale, Bank of Ireland — in which the Government owns a 14% stake — will buy back the bulk of the broker it originally owned 15 years ago by paying €440m for the wealth management business and its capital markets division. The sale also involves the disposals of the Davy Global Fund Management unit and a stake in a small investment fund to two separate buyers for up to €125m.

Five shareholders to gain a combined €185m

Five large shareholders, who once held senior positions at the firm, are set to gain a combined €185m from the sale.

Ireland's largest broker was plunged into crisis in March when the Central Bank slapped it with a record €4.1m fine after a multi-year investigation found Davy failed to supervise a consortium of 16 of its own employees in their dealings in the sale of Anglo-Irish bonds for a client, in late 2014. The controversy marked a further stain on the financial services industry here and led to a public and political outcry.

Sale does not end the controversy

However, Mr McGuinness warned the sale doesn’t end the controversy, saying that new owner, Bank of Ireland, needs to do more to investigate the 2014 transaction, and more action is needed from the Central Bank after Davy yesterday revealed some of the findings of a consultant report it had ordered into Davy’s dealings since 2014. 

He said that Bank of Ireland chiefs will be questioned by his Oireachtas committee when it reconvenes in the new Dáil term.

To contain the fallout, Davy put itself up for sale in March and appointed consultant Alvarez & Marsal, or A&M, to review Davy dealings, but only starting from the 2014 bond trade. 

Deals 'were not adequately reviewed'

The A&M report found no dealings that matched the 2014 deal but reported a very small number of deals that were not "subject to adequate” review. It also recommended the Davy board to "further tighten" its policy over personal dealings, staff training, and whistleblowing.

Niamh Brennan, professor at the UCD Centre for Corporate Governance, said because it was sold for a better-than-expected price, the broker's large shareholders hadn't suffered any monetary cost. Davy again apologised "unreservedly" for its failures.

Finance Minister Paschal Donohoe said the sale of the bulk of the firm to Bank of Ireland will bring "certainty". There was no change to Government policy on top bankers' pay under the deal, he said.

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