AIB had ‘no role in drafting guarantee’

The former chairman of AIB has claimed the bank had no role in drafting the bank guarantee and that no bank could have stopped the bubble.

AIB chiefs submitted their thoughts to the government on the night of the guarantee in 2008 on a scrap of paper, which cannot now be found.

Former chairman Dermot Gleeson said the first time he and his officials heard that six institutions were to be guaranteed was from the media the next morning.

Giving evidence at the banking inquiry, Mr Gleeson outlined how he and bank officials were in Government buildings on the night of September 29, 2008. He said at the time that the appetite for risk and lending was “excessive” in the sector. There was a failure to envisage a serious property downturn, he admitted.

Tax incentives were commonplace, he noted, and local authorities had taken in over €3bn in property-related charges over 10 years. Before the bust, a majority of economists favoured a soft landing, he added.

Anglo Irish Bank had been held up as an “exemplar”, he said: “It was the darling of not just Ireland, but European stock.”

DISCOVER MORE CONTENT LIKE THIS

A more intrusive regulator or “referee” should have been in place in the highly-competitive sector, he said. “No bank could stop the bubble... only the authorities could do that.”

However, he did admit that AIB had “gone too far” with individual developers.

He said that, in the lead-up to the guarantee, it was known that two lenders — Anglo and Irish Nationwide — were facing collapse.

The bigger banks — AIB and Bank of Ireland — met with the government.

Mr Gleeson said the two big banks said Anglo and Nationwide needed to be “dealt with decisively” and a guarantee put in place for the remaining banks. It was agreed €10bn would be made available to get them to the weekend.

However, Mr Gleeson said the guarantee was never discussed with AIB and its representatives were not in the room. It was an independent government decision and only their advice was sought.

AIB’s formula had been put on a “slip of paper or a turn of a notebook”, as suggested from the bank’s treasury, the committee heard.

It mentioned guaranteeing deposits and bonds, Mr Gleeson agreed, and contained maybe less than 20 words. This was handed to government but has not been found since. It also included covering senior bond holders, said Mr Gleeson.

He also admitted that, just three days before the guarantee, €260m in dividends was paid to shareholders, including himself. This was a “mistake”, he said. It was done to reassure investors, despite the fact the bank went on days later to be guaranteed.

Mr Gleeson said AIB did not want Anglo or Irish Nationwide incorporated into the guarantee and this had damaged the bank.

DISCOVER MORE CONTENT LIKE THIS