Firms earn €80m from handling bailouts

A golden circle of a dozen or so large firms have an effective monopoly on handling EU bailouts and use them to their advantage, according to an investigation by international journalists.

They said financial consultants were paid well over €80m for their work on estimating the sums of money needed by the bailout countries, including Ireland, over the past few years.

The number of globally recognised accountancy firms, lawyers, and financial consultants are so few and so large that there are many conflicts of interest

The study looked at the Irish bailout in which BlackRock Solutions was hired to forecast how much banks risked losing, and to stress-test them according to worst case scenarios.

The US company was also engaged by the Central Bank to help with the 2012 and 2013 reviews of banks’ capital needs — giving them a knowledge of Irish banks from the inside.

At the same time, the company’s parent firm, BlackRock, the biggest asset manager in the world, had over €5bn worth of client business in Ireland and assets domiciled in Ireland worth €162bn, according to a company statement from April last year.

Earlier this year, the parent company announced it would buy 3% of Bank of Ireland — one of the banks BlackRock Solutions had stress-tested in 2011.

Tom McDonnell, an economist with think-tank Tasc, said there was no proof BlackRock used insider knowledge, but in terms of public perception, the set-up was “problematic”.

Hiring big names in the consultancy business loaned governments in bailed-out countries more credibility, especially in financial markets, it is claimed.

The consultancies were interested in getting the jobs not because of the fees but because it allowed them to make contact with people in governments.

The source — a former Irish tax official who asked to remain anonymous — shed light on how this worked, recalling meetings with the ‘Big Four’ accountancy representatives who “basically introduced Facebook into Ireland”.

The source said: “The bureaucracy, in the sense of senior civil servants, happily arranged meetings with the accountancy firms’ clients or even prospective clients… You would discuss with them the Irish tax system. It was all very friendly.”

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