Mr. Donal Forde:

Thank you, Chairman, and thank you for the invitation to appear before the committee. In that invitation I was asked to give evidence relating to a number of lines of inquiry in the context of three positions which I held in my employment with the AIB Group, specifically in the years from 1999 to 2009. Those three roles were general manager of the strategic development unit in the bank, managing director of AIB Bank, Republic of Ireland, and as director of group strategy at AIB plc. I just want to take the three of these in turn for a while if I might.

I was general manager of the bank's strategic development unit from September 1999 to April 2002. That was a strategic marketing role. In that position I had no responsibility for credit management or credit strategy. I was appointed as managing director of AIB Bank in April 2002, and I held that position until February 2009, you may have mentioned May 2009 earlier. I believe it is principally in the context of this role that I can be of assistance to the inquiry. AIB Bank was the domestic retail banking division of AIB Group. As its managing director I was responsible for all aspects of the division's activity in accordance with AIB Group policies and governance. Specifically in the context of credit strategies, credit approval or credit risk management, activities were all conducted within policies that were set out by the central group risk management function, endorsed by the group executive committee and approved by the board of directors.

Thereafter, these activities were supervised by the group risk management function with support from the internal audit function. As managing director of AIB Bank, I did not have any credit discretion. My responsibility was to manage the business to the highest possible level of performance in all respects, and to do so within the credit risk policies and credit risk management frameworks that were set and ordained at group level. Let me make it clear that, in outlining the corporate governance structure within which the AIB Bank division operated, I am doing that for the purpose of clarity. I am not in any way suggesting that I am without a share of the responsibility for the failure of the bank. I was part of the group executive management committee through this period and I became a member of the AIB Group board in 2007. My voice would have been an influential one if I had questioned or challenged our credit strategy and credit positioning at these fora, but I did not do so. While I had expected a faltering of economic activity and a pull back in the property market, I simply did not foresee the scale of the collapse that was to follow. It is clear now that AIB credit policies were inappropriate at that advanced stage of the economic cycle. At the time, I believe that the economy was on a more resilient and sustainable footing than subsequently proved to be the case.

With the wisdom of hindsight, this was a serious misjudgment on my part and on the part of many others within the bank and outside. My own failing in this respect is a matter of deep personal regret and I am very conscious of the implications of that misjudgment for very many people. In late January and February of 2009, I was informed by the AIB Group chief executive that I was being moved from my post as managing director of AIB Bank to a newly created position as director of group strategy. However, that position never materialised in the way that was indicated to me at the outset. I found myself from that point completely removed from discussions at executive management and board level, and without objectives or direction in terms of a work agenda. That situation persisted until I decided to leave the bank nine months later in November 2009. Throughout my time in this role, I had no involvement in the management of the bank and very little knowledge of developments from a credit risk perspective.

Turning to the specific lines of inquiry that I was asked to address, I have addressed each of these in my written statement. In the interest of time, I will not read through the detail of the views and perspectives that I have to offer, but I am happy to elaborate on my submission in any way that the committee considers helpful. I have summarised that submission, Chairman, with my personal conclusion that the failure of the bank was primarily attributed to the failure of our credit risk management policy. Our stress testing of customers' repayment capacity was not sufficiently challenging, and our loan to value constraint on security was inadequate. The impact of these principle factors was exacerbated by an excessive weighting of property exposure in our portfolio, an undue level of exposure to individual counter parties, and there were external factors that contributed to the difficulty. There were inappropriate accounting protocols in my view for loan loss provisioning, there was unanticipated and increased funding costs, there was an external requirement for increased capital and all of these added to the strain.

I hope my statement is helpful to the committee. I have relied primarily on my recollection of events in preparing material for the inquiry and this may mean that some points of detail have escaped me. With that caveat, I am happy to address any more detailed questions that may arise. Thank you, Chairman.