Ex-Bank of Ireland boss gives account of guarantee

Anglo Irish Bank asked Bank of Ireland to take it over while the Central Bank also asked BoI to consider buying Irish Life and Permanent in the hours before the September 2008 bank guarantee.

Former Bank of Ireland group chief executive Brian Goggin revealed the options were put forward, and flatly rejected, as he outlined what happened in the “catastrophic” hours that became “the worst day of my life”.

Speaking at the Oireachtas banking inquiry, Mr Goggin said Anglo officials requested an “emergency” meeting with Bank of Ireland at 2.30pm that day at which they asked to be purchased by BoI as they had a “€1.5-2bn liability maturing the next day” which could not be paid back.

Mr Goggin turned down the offer, as did AIB, before meeting with the Central Bank which said BoI should “consider” purchasing another stricken firm, Irish Life and Permanent, a move members of the inquiry suggested was a last-minute effort to hide a crisis.

That evening, Mr Goggin was asked to attend Government Buildings, where he and other bankers held crisis meetings with then Taoiseach Brian Cowen and Finance Minister Brian Lenihan over the need for a bank guarantee to protect other institutions due to the imminent Anglo Irish closure.

He said while the politicians initially made it “very clear to us government was not inclined to intervene in any of the banks” and “expected Bank of Ireland and AIB to provide a solution” the “gravity of the situation” soon changed views.

A number of options were considered including a guarantee limited to Anglo Irish only, which Mr Goggin said was unworkable as “all the deposits would have just ended up in St Stephen’s Green [Anglo’s headquarters] and the rets would have been in chaos”.

However, it was ultimately decided to put forward a six-bank guarantee, which Mr Goggin said AIB were fully aware of – contradicting previous evidence from ex-AIB chairman Dermot Gleeson and chief executive Eugene Sheehy, who he said were both in the room at the time.

Mr Goggin said Mr Cowen was chairing the meetings and “very much in charge”, while Mr Lenihan was “running around” holding conversations with the various parties. He insisted Bank of Ireland was solvent at the time and only needed a guarantee due to the brewing Anglo Irish crisis.

Meanwhile, Mr Goggin also confirmed that an unknown group was “lobbying” for a “system-wide” guarantee as early as “June or July 2008”. Mr Goggin made the remarks as he admitted his 2007 salary was a massive €4m. He said he was paid “exceptionally well”, but refused to make any comment about whether he “merited” the income Fianna Fáil finance spokesperson Michael McGrath described as “mouth-watering”.

The former Bank of Ireland boss repeatedly said “the board determined” his salary and that he “had no impact on that”, and declined to reveal his current pension pot – despite Mr McGrath noting media reports that it reaches €650,000 a year.

When asked by Fine Gael TD Kieran O’Donnell if the way in which bonuses were calculated – changed from a 30-70% profit-cost level in the early 2000s to a 75-25% rate at the height of the boom – showed Bank of Ireland was “chasing” after the Anglo Irish property customers by incentivising bankers to lend more, he said “no, absolutely not”.

However, Mr Goggin did accept “it is now obvious that property lending was too much” and “exposed” the bank to “vulnerability”, with the loans to deposits ratio standing at 176% at its height. He admitted “we did not think we were vulnerable to a shock [the crash] of this extent”, adding: “Ultimately we were wrong.”

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