Banking Inquiry: State was told not to include duo in deal

The mystery over why Anglo and Irish Nationwide were included in the blanket bank guarantee deepened after another senior banker said yesterday that he advised the Government not to include the stricken firms in the deal.

Thu, 30 Apr, 2015 - 01:00

Fiachra Ó Cionnaith

Former AIB chief Eugene Sheehy said he “did not understand” why they were included in the September 29, 2008 agreement because he told then finance minister Brian Lenihan and then taoiseach Brian Cowen the guarantee should be limited to just four banks.

Speaking at the latest banking inquiry meeting, Mr Sheehy — who was AIB chief at the time of the crash — said it was widely believed Anglo and Irish Nationwide were likely to collapse.

While he said a guarantee for four other institutions was needed to stop “panic on the streets” if Anglo defaulted and that “no bank could survive” without the State assistance, he insisted this was as far as he believed the deal should go.

“All our discussions that night were based upon the premise that Anglo was to be taken down and as such we did not think they would be part of the guarantee,” he said.

Mr Sheehy also revealed that after the September 29 meeting, Mr Lenihan contacted him to see if AIB would be willing to take over Anglo, a strategy known as project Omega which then AIB chair Dermot Gleeson last week told the banking inquiry he did not recall.

Mr Sheehy said the phonecall did happen, but that he rejected the offer.

Under questioning from the cross-party group, he denied suggesting AIB was in danger of bankruptcy, saying it simply faced “manageable” solvency issues in part because it was over-focused on “developer-land”.

While he and his predecessor Michael Buckley said no “reckless” lending took place, they accepted the bank’s Irish property-related funds trebled from €4bn to €11bn between 2001 and 2005.

Current AIB chief David Duffy said without the guarantee Ireland would have faced “a more severe outcome”.

Meanwhile, Mr Sheehy described the financial regulator at the time of the bust, Patrick Neary, as “diligent” and “a tough nut to crack”.

Mr Sheehy said Mr Neary was up to the job and merely suffered from being under-staffed.

The inquiry will meet this afternoon with former ECB president Jean-Claude Trichet.

The meeting has sparked controversy as Mr Trichet has declined a Leinster House meeting and has already been provided with the first question from each inquiry member.

Among the latest people to be told they must attend public meetings over the coming weeks are developers Michael O’Flynn, Joe O’Reilly, and Seán Mulryan, and former attorney general Paul Gallagher.

Others informed last night include ex-Department of the Taoiseach secretary general Dermot McCarthy, and former advisors to the late Brian Lenihan, Cathy Herbert and Alan Ahearne.