Bank of Ireland insisted bondholders’ €12.2bn debt be guaranteed

More than €12.2bn in junior bondholder debt was only included in the 2008 bank guarantee because Bank of Ireland insisted it would damage the economy if it was left unprotected.

Bank of Ireland argued for the inclusion of the debt in the controversial blanket bank guarantee due to the potential damage it could cause otherwise.

The bank’s former chief executive, Brian Goggin, confirmed he put forward the deeply unpopular call, but said it was because of the impact leaving junior bondholder debt untouched could have had on the rest of the economy.

The bank had an interest, it emerged, in almost half of the debt.

Responding to questions from Fine Gael’s Kieran O’Donnell, the former senior banker said the reason for the call was because he was “concerned about the cross-over between junior and senior bondholders” and it had been done in the interests of the sovereign.

Asked if that meant Bank of Ireland specifically asked for “lower-tier subordinated debt to be included”, Mr Goggin replied: “Yes”.

Junior bondholder debt accounted for €12.2bn of the €375bn included in the bank guarantee — €5.2bn of which was held by Bank of Ireland.

When questioned by Fianna Fáil finance spokesperson Michael McGrath that his own bank “stood to benefit the most” from the inclusion, and asked about the Central Bank governor Patrick Honohan’s subsequent criticism of the decision, Mr Goggin said “only” €750m of the €5.2bn was covered by the two-year bank guarantee.

He said the remainder —€4.6bn — related to the period 2013 to 2036, and, as such, fell outside the deal.

Mr Goggin also told the inquiry he advised the then financial regulator, Patrick Neary, in a 2006 meeting to issue a ban on 100% mortgages and that he would back the decision.

“I advised him to immediately ban mortgages over 90% and I would back him publicly immediately.

“He said it wasn’t his role to interfere in the market. I told him this is the very time [he should],” Mr Goggin said.

Asked by Mr O’Donnell why, despite that viewpoint, Bank of Ireland had seen a surge in 100% mortgages targeted mainly at single people in their 30s on €50,000 to €60,000 salaries — leaving the institution open to significant client arrears — Mr Goggin said the company had been “losing market share” and was “very much a reluctant follower”.

Under later questioning by Fine Gael senator Seán Barrett, who sought clarity on why the financial regulator did not want to intervene, Mr Goggin said he “saw no reason why” as the matter was getting out of hand.

Asked if there were any other “light-touch instances”, the former bank CEO said he “didn’t have a huge amount of interaction with the regulator” and that any discussions took place via a side body.

“I might have had an annual relationship-type meeting, but very little detailed interaction on a day to day basis.”

DISCOVER MORE CONTENT LIKE THIS

More on this topic

Banking Inquiry members to review responses to draft reportBanking Inquiry members to review responses to draft report

Banking Inquiry Committee agrees on draft report despite objectionsBanking Inquiry Committee agrees on draft report despite objections

ECB went beyond mandate issuing ultimatum to Ireland, says former IMF mission chief ChopraECB went beyond mandate issuing ultimatum to Ireland, says former IMF mission chief Chopra

Lenihan wanted to burn bondholders and rebrand Anglo as 'An Banc Nua', inquiry toldLenihan wanted to burn bondholders and rebrand Anglo as 'An Banc Nua', inquiry told


Lifestyle

It turns out 40 is no longer the new 30 – a new study says 47 is the age of peak unhappiness. The mid-life crisis is all too real, writes Antoinette Tyrrell.A midlife revolution: A new study says 47 is the age of peak unhappiness

More From The Irish Examiner