Bank guarantee ‘was a government decision’

Richard Burrows, Bank of Ireland governor from 2005 to 2009 said they were told by then taoiseach Brian Cowen that a blanket guarantee option was being taken.

The 2008 bank guarantee could have been avoided or changed if the government accepted a €10bn offer from other banks to temporarily keep Anglo Irish Bank afloat.

The claim was made at the latest banking inquiry meeting by former Bank of Ireland governors, who also revealed the Central Bank had no plan B if Anglo failed and gave yet another version of the guarantee night.

Richard Burrows, Bank of Ireland governor from 2005 to 2009, told the Dáil group that, after being alerted to the escalating Anglo crisis and its potential impact, he and AIB counterpart Dermot Gleeson set up an emergency meeting with cabinet.

At the September 28, 2008, meeting he said the banks were asked to provide €5bn each to keep Anglo afloat, an issue Mr Burrows believed was a “short-term” measure “to get the problem off the table for the following day” and give government breathing space “up to the weekend”.

However, after accepting the plan, Mr Burrows said they were told by then taoiseach Brian Cowen that it was no longer needed and a blanket guarantee option was being taken instead.

“It was not something we asked for. It was a government decision,” he said.

Hours earlier, he had met with former Anglo chairman Seán Fitzpatrick, who was “pleading” for Bank of Ireland and AIB to buy the stricken firm due to an imminent insolvency crisis.

After declining, he contacted his Central Bank counterpart John Hurley. “I asked if there was a plan in place to deal with this situation,” said Mr Burrows. I was surprised to learn there was not,” he said.

Mr Burrows, who attended alongside his 2002 to 2005 predecessor, Laurence Crowley, also gave the inquiry yet another version of the bank guarantee night.

Contradicting AIB, he said both banks were told it would be a six-year and not a four-year guarantee, while he said he was “mystified” to hear his then CEO Brian Goggin suggested including sub-ordinated debt.

While Bank of Ireland meeting minutes purport to show Mr Burrows knew of a bank guarantee plan before the government meeting, he insisted this was inaccurate.

At the same meeting, Mr Burrows was asked about boom-time salaries, including his own €503,000 in 2009, and if linking bonuses to loan levels was an issue.

He said the fees were “competitive”, declining to use the word “significant”, and that the “remuneration was perfectly fair”.

However, he accepted a bonuses “claw back” feature should have been in place to hold the extra money back until it was clear linked loans were valid.

The second auditors to attend the inquiry have mirrored Deloitte Ireland’s evidence by insisting they “were not inept” and did “very high quality work”.

KPMG financial services partner Paul Dobey and former managing partner Terence O Rourke — whose firm received €1.5m a year from AIB — said “only so much can be expected of accounting”.

He said a post-boom independent review of KPMG’s work with AIB in 2007 and 2008 found “nothing of substance”, despite accepting “we don’t audit every last penny”.

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