Report missed scale of bank losses

A report on the health of the Irish banking system — commissioned by the financial regulator in 2008 and relied upon by taoiseach Brian Cowen to justify the bank guarantee — drastically underestimated the extent of losses that would be made.

The report, compiled by PriceWaterhouseCoopers (PwC), found that in its worst case scenario, Irish banks would lose €10.6bn at most.

The figure pales in comparison to the €64bn taxpayer-funded bailout the country’s banks eventually needed.

The projection of the potential losses at Anglo Irish Bank was just a tenth of the €29bn losses it ultimately suffered.

The picture is replicated across the other lenders.

PwC’s report relies, as it frequently states, on figures provided to it by the banks — showing that top executives either refused to believe or to admit that they were about to go bust.

In the case of AIB, €4bn at worst was projected to be in peril as opposed to the almost €21bn total that the bank ultimately required.

The figures, published by the Sunday Business Post, also shed some light on the small number of businessmen and developers whose multibillion-euro exposures were subsequently guaranteed by the State.

Just 22 men and their related companies owed more than €25.5bn at the time of the crash, including former billionaire Seán Quinn (€2.85bn); Cork developer Michael O’Flynn (€1.8bn), and media tycoon Denis O’Brien (€1bn).

Mr Quinn’s borrowings were largely held with Anglo Irish Bank, to whom he owed €2.7bn, with a further €145m owed to Bank of Ireland.

The report also states that the banks’ exposure to land and development land stood at €63bn.

The top 22 developers alone held an €8.8bn exposure to development land.

Structural issues within the banks are laid bare by the report, which also finds that AIB had breached financial regulator limits on concentrations of its lending.

The investigation was commissioned by then financial regulator Patrick Neary as part of Project Atlas which began in September 2008, with Anglo Irish Bank, Irish Nationwide, and Irish Life and Permanent the focus of its work.

The other main lenders were subsequently added a month later.

Despite a host of caveats and qualifications from PwC, Mr Cowen held the report out as justification for the bank guarantee when addressing the Dáil in insisting that the banks were adequately capitalised for the coming years.


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