Bank of Ireland officials knew the bank might need taxpayer help as early as June 2008 to weather “a storm” descending on the financial sector.
Chief executive Richie Boucher admitted the until-now private view to the banking inquiry, saying while the bank did not need a guarantee “on the night” of September 29, 2008, the support would have been required a matter of weeks later if no action was taken.
Speaking to the inquiry, Mr Boucher said Bank of Ireland had concerns it was “not sufficiently capitalised for a storm that could come” months before the crash happened. He said this was because of wider difficulties in the market, and the impact they could have on the bank.
The senior banker — who was watched from the audience by the man at the centre of the Gorse Hill saga, Brian O Donnell throughout the hearing — admitted the bank was “overexposed” in the loans it provided, and the board “did not always” have “sufficient” information on the risks it was facing in a “very exuberant” market.
He said the issues were apparent in other banks and ultimately led to a “system guarantee” on September 29, 2008, a move he said all banks involved were aware of — contradicting AIB’s claims they were told it was for four banks.
When asked about the guarantee itself, Mr Boucher appeared to question his predecessor Brian Goggin’s push for subordinated debt to be included in the initial deal, saying it was a “surprise” to him, but he said without a structured system a “disorderly” closure of Anglo Irish Bank had “very serious implications” for the sector.
Speaking at a later hearing, Ulster Bank chief executive and current finance chief for bookmaker Paddy Power, Cormac McCarthy, said by being outside the guarantee his bank lost “€2bn-€3bn” out of its €25bn deposits to “predator” banks that were protected.
Mr McCarthy also responded to criticism of the introduction of 100% mortgages to Ireland by saying no one specifically told them to stop. He said the product — which saw more than €1bn given to 4,000 customers in four years — began in 2004 as Ulster Bank’s market share was “coming under pressure”. However, despite widespread criticism from the Oireachtas inquiry members, Mr McCarthy said it was also based on “customer feedback” and that it prevented customers from “having to rely on extensive short-term debt or credit cards”.
While Labour senator Susan O’ Keeffe said 100% mortgages were tantamount to giving everyone a “carte blanche” to buy a house, Mr McCarthy said: “I’m saying simply, the regulator did not object to our product”.
During the boom, Mr McCarthy and other senior Ulster Bank officials received bonuses worth multiples of their salaries, culminating in a €1.1m package in 2007. However, the former banker rejected claims bonuses linked to loan output was a “driver” in company decisions.
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