Watchdog sets up loans committee

The board of the Financial Regulator tonight set up a high-level committee to probe directors’ loans in Anglo Irish Bank and other financial institutions.

The watchdog has been heavily criticised for failing to act over a €87m loans fiasco at Anglo Irish Bank which has forced the resignation of three senior executives since Thursday.

The board of the Irish Financial Services Regulatory Authority met yesterday and today to discuss the issue, which it said was first brought to its attention on December 17.

“A committee of the board has been established to undertake an urgent review of these events and the regulatory response, and will report to the Authority in three weeks,” a statement said.

The Authority has also began a review to investigate the use of directors’ loans in the institutions covered by the Government guarantee scheme so as to ensure that proper standards are being observed.

The statement added: “The Authority has already intensified its prudential supervision of covered institutions and other regulated entities.

“Regulator staff have been placed in all covered institutions on a full time basis.”

Earlier Government ministers Mary Hanafin and John Gormley criticised the complacency of Financial Regulator Patrick Neary in acting on information about the Anglo Irish loans.

Mr Neary is believed to have known since January that chairman Sean FitzPatrick had been temporarily transferring Anglo Irish Bank loans worth €87m to another bank between 2000 and 2007 to hide them from shareholders and the public.

Social and Family Affairs Minister Ms Hanafin said today of the regulator: “I think there are really serious questions and I don’t know why that information wasn’t given before now.”

However Ms Hanafin stopped short of calling for Mr Neary’s resignation over the scandal.

“There may be a whole pile of reasons why this information was kept. It wouldn’t be fair for me to get into that,” she told the Saturday Edition programme on Newstalk Radio.

“It’s very difficult to see the circumstances as to why the Minister for Finance, at a time of actively negotiating with the financial sector, did not receive that information.”

Anglo Irish Bank chairman Sean Fitzpatrick’s resignation was followed by the exit of chief executive David Drumm and non-executive director Lar Bradshaw.

Newly appointed Anglo Irish chairman Donal O’Connor said the financial would co-operate fully with the Government in talks over a €10bn recapitalisation plan for the banking sector.