Call for review of banking regulations

The Government was tonight urged to launch a root and branch review of banking regulations as five more directors of scandal-hit Anglo Irish Bank quit, and banking shares plunged on the stock exchange.

The country’s finance union branded current rules inadequate and demanded an independent audit of the controversial deals which led to the loans scandal at Anglo Irish Bank.

A further five directors quit the lender and their walkout was followed by the early retirement of Bank of Ireland chief executive Brian Goggin who will step down this summer, a year early.

Anglo had already lost four top executives, including former chief Sean FitzPatrick, who secretly borrowed €129m from the institution to buy shares, fund property deals and invest in pensions and film projects.

The latest resignations further damaged confidence in Ireland’s once-powerful finance sector, with shares in Allied Irish Bank and Bank of Ireland down to 60 cents and 34 cents in a dramatic selloff today.

Larry Broderick, Irish Bank Officials Association (IBOA) general secretary, said the banking industry was no longer strong enough to help pull Ireland out of recession.

“In order to plan effectively for the future, it is necessary to learn the lessons of the past – and especially from the mistakes of the past. Otherwise we will be doomed to repeat them,” he said.

Mr Broderick said banks should be playing a pivotal role in driving the recovery.

“Unfortunately, as a result of a number of factors – but chiefly the singular pursuit of short-term paper profits for shareholders rather than the building of sustainable value in the long-term – Irish banking is ill-equipped to discharge that responsibility,” he said.

TDs and Senators will tomorrow debate the Government’s plan to nationalise Anglo Irish as they mark the 90th anniversary of Dáil Éireann. The Cabinet will then hold a special two-day Cabinet meeting on the economy on Wednesday and Thursday.

Justice Minister Dermot Ahern said the Government had a duty to protect jobs in the finance sector.

“If any of our major banks were to get into difficulty, like Anglo Irish Bank, we have to respond because if we don’t respond, people will lose their jobs and their livelihoods and we can’t stand idly by and allow that happen,” Mr Ahern said.

The minister denied Opposition claims that Fianna Fáil-led governments had helped cause the property crash and banking scandals.

The five directors leaving Anglo are Noel Harwerth, Anne Heraty, Michael Jacob, Gary McGann and Ned Sullivan. They wrote to newly-appointed chairman Donal O’Connor claiming their resignations would allow Finance Minister Brian Lenihan to name a new board.

Former Bank of Ireland chairman Maurice Keane will join the board as a non-executive director.

Meanwhile, the IBOA issued the Government with a list of demands designed to clean up the country’s tarnished banking sector.

IBOA called for an independent, published audit of the circumstances that led to the loans fiasco at Anglo Irish.

The union’s chief Mr Broderick also called for a close look at the role of Irish Nationwide played in the scandal which saw Anglo’s most senior banker secretly shift millions in and out of the building society over seven years.

The IBOA expressed concern over the future of Allied Irish Bank and Bank of Ireland and claimed efforts to drum up further investment among international financiers could leave them vulnerable to hostile takeover by private equity companies.

“The Government must take whatever action is necessary to prevent control of the twin pillars of the banking sector falling into the hands of predators who have little regard for the long-term future of these institutions and less still for the health of the Irish economy,” Mr Broderick said.

Mr Broderick also expressed concern at plans by the UK Government to increase its stake in the Royal Bank of Scotland to 70%.