Mr. Peter Fitzgerald:

Thank you Chairman and members of the committee. Firstly, I would like to say that I welcome this opportunity to share my experience in the roles I held in Anglo Irish Bank and IBRC with the members of the joint committee. I look forward to answering, as best I can and to the extent possible, any questions you have in relation to my performance in those roles and wider matters relating to the bank both pre and post its nationalisation.

To enable best usage of the time allocated to this session, I have narrowed the focus of my opening statement to deal with what I believe are the key areas of my testimony. By way of background, I have worked in financial services for a substantive part of my career to date, beginning in corporate treasury roles in First Active and KBC, followed then by a variety of roles within Anglo Irish Bank and, latterly, IBRC. These roles in Anglo were performed over a 15-year period from 1998 to 2013. From 1998 up to managing the sale of the credit ... under the Credit Institutions (Stabilisation) Act of the bank's deposits and NAMA bonds to Allied Irish Banks plc in February 2011, my main role was to raise customer deposits in order to fund the bank's balance sheet growth. I performed that role as a corporate deposit manager up to 2001, as head of retail banking from 2001 to 2006, as director of corporate and retail treasury from 2006 to 2008 and as head of retail banking again from 2008 to 2011. During this period, I reported to the head of corporate deposits, head of treasury, director of treasury, the managing director of Ireland and the head of operations in the bank, respectively.

I was appointed to the senior executive board or the SEB for a 12-month period from in and around the middle of 2006 to 2007. This was a management level below the main board of the bank. I also served on a number of management committees and subsidiary company boards at various times. I did not, however, serve as an executive director or member of the board of Anglo Irish Bank or any of its sub-committees.

Following the appointment of Mike Aynsley as the new CEO in late 2009, I became a member of the new leadership team of the bank and worked in a number of significant post-nationalisation restructuring projects. Finally, in early 2011, I was appointed as head of corporate treasury, or corporate affairs and communications, a role I held until my departure from IBRC in February 2013. For the purpose of clarity, my responsibilities in all of the roles previously mentioned did not extend to lending to customers or involvement in the credit, risk, audit or compliance functions of the bank.

The primary role of the group treasury role of Anglo was to fund the bank's lending growth. Both wholesale and customer funding were sourced for this purpose. By 2008, a significant portion of the bank's balance sheet was funded with customer deposits from two main categories, namely, retail deposit customers and corporate deposit customers. These deposits were the lifeblood of the bank and the business proposition was interest rate and customer service driven. The marginal returns offered for surplus cash on deposit made it worthwhile for customers to switch banking relationships for this aspect of their business alone. The corporate deposit customer profile ranged from SMEs to large corporate and institutional clients across practically every business sector. Retail customers were predominantly older savers with lump sums to invest.

The centres for sourcing corporate deposits in Anglo Irish Bank grew from a small network of branches in Ireland and offshore in the '70s to a large group treasury centre in Dublin in the '80s, followed by an ... additional branches in the UK and another large treasury centre in London in the '90s. From 2000 onwards, further centres in Austria, Dusseldorf, Jersey and Boston were used to source corporate deposits in line with asset growth. As a result of this planned expansion, deposits from corporate customers in Anglo grew year-on-year to €32 billion in 2008, accounting for 36% of the total funding position of the bank. The strategic intent to broaden its funding base to include deposits from retail customers was established in 2001 in line with the introduction of the SSIA, or special savings incentive scheme, in Ireland. Once established, the retail savings function in Ireland became successful very quickly and attracted significant positive media coverage and commentary due to the perceived lack of competitive offerings for savers in Ireland at that time.

Following this success, a strategic decision was then taken in 2004 to launch a retail savings proposition in the United Kingdom. While the UK savings market was, at the time, one of the most competitive in Europe, it was agreed to proceed and, following a test-and-learn period in early 2005, the bank began to enjoy considerable success with UK savers and growth was driven using high interest rates advertised in best-buy tables, in online and offline media and other comparator and aggregator sites such as moneysupermarket.com.

The remaining retail funding site of the bank was the Isle of Man. This had been in operation for many years and attracted a limited but consistent level of savings from onshore and offshore high net worth savers. While successful among its local peers in this space, the Isle of Man operation would always remain the smallest retail saving centre operated by the bank up to nationalisation. As a result of this planned expansion from early 2001 to its peak in 2008, the volume of retail savings from those three markets alone grew to circa€19 billion of funds entrusted. Close to 50% of these funds had come from the UK market over a relatively short period of time, with the balance coming from Ireland and the Isle of Man. Total deposits from retail customers in 2008 accounted for 22% of the overall funding position of the bank. At its peak, therefore, Anglo Irish Bank had a total portfolio of €51 billion of deposits, which accounted for 58% of the total funding sources of the bank. Given the strong growth of the UK retail funding franchise, a full launch plan was developed and under consideration to enter the German savings market in 2009. This was with a view to reducing the growing geographic concentration and significantly expanding the bank's future potential funding sources. This plan, however, was never implemented following the nationalisation of the bank.

The fast-growing concentration of UK-sourced retail funding was influenced by the increase in the Irish deposit protection scheme in Ireland and the subsequent introduction of the Government guarantee, as I have detailed in my witness statement. The collapse of Northern Rock was the first event that weakened customer confidence in the security of their savings with Anglo Irish Bank. The bank took thousands of calls per day from concerned customers who either wanted to withdraw funds or seek assurances that their deposits were safe.

While the UK retail centre of the bank was the main focus of calls from UK customers, Irish savers became equally nervous when queues formed outside the Northern Rock office in Dublin.

The collapse of Anglo's share price on 17 March was the second event to weaken customer confidence in the security of their savings. The seriousness of this event was greatly inflated by the fact that the Anglo share price, alone among Irish banks, was being targeted by sellers and fell by circa15% on that day. The outflows were significant and the bank ran a very real risk of not being able to handle the volume of inbound calls from concerned customers. It also introduced the first real risk of the bank’s branches in Dublin, Waterford, Cork, Limerick and Galway not being able to deal with the volume of customers calling to close their accounts.

The collapse of Lehman Brothers on 15 September 2008 was the third and final event that shook the confidence of customers in the safety of their savings. It is my view that the bank experienced a full-blown run on customer deposits from that period up to 29 September 2008. As the primary channel for both corporate and retail customers dealing with the bank, however, was via the telephone, this run never fully manifested itself in the public domain. In Ireland in particular however, the word on the street was that Anglo was in serious trouble. It was an incredibly stressful time for retail deposit customers in particular, many of whom still had all of their savings with the bank. While having survived two material events of this nature, the events of September brought a new level of uncertainty for the staff and management of the bank and, with the share price now below 30 cent, I believe most of the senior staff honestly feared the bank might not recover.

Up to the start of the crisis in August 2007, Anglo Irish Bank was lauded on the stock market for its spectacular balance sheet growth and highly profitable business model. This and Anglo’s commentary from a multitude of market analysts and other commentators led to Anglo being put forward as an example to its competitors and peers. In terms of the bank’s chosen credit strategy therefore, as a predominantly property-based lender in the Irish, UK and North American markets, it was difficult to foresee that everybody internally and externally could be wrong. The bank’s loan default rates had remained very low for the previous decade and there remained a huge appetite for commercial property projects, in particular among investors and developers in the bank’s chosen markets. Existing clients of the bank who had experience and track record in that sector were on hand to meet the demand and the clients’ stated credit policy was to back and work with these types of clients where the property had strong tenants, where cashflows could be identified and secured and where personal guarantees were available as additional security.

Anglo was three monoline banking divisions in one financial institution, namely, lending, treasury and wealth management. While all were successful in rapidly growing and diversifying their markets for their individual activities, each sold what could be broadly viewed as a single financial product into a highly targeted customer base, i.e., loans to borrowers in the real estate sector, deposits to interest-rate sensitive corporate and retail customers and predominantly real estate investment products often geared to high net worth individual clients. While the global liquidity crisis affected nearly every bank worldwide to some degree in 2007 and 2008, the underlying structure of the bank, together with the pace at which it had grown in that structure, compounded the stress of that crisis in a much higher degree to other banks who had lower concentration of lending exposures, more diversified funding sources and fee income from a wider universal offering to a diverse and longer-established customer base.

While Anglo Irish Bank had ceased development lending to new clients and had no direct exposure to private mortgage lending, the monoline exposure to a highly mobile customer deposit base in particular hit Anglo hard and fast in late 2008, as the perceived liquidity issue quickly became an actual one for the bank. Further complications arose for the bank out of the difficulty in reducing or stopping lending as the crisis worsened. This was in part down to the contractual commitments to borrowers and also the risk that without further lending, some development projects would cease and result in immediate and significant loan default. All of this took place in the face of unforeseen and therefore unanticipated risks, which included a total market dislocation and a practically simultaneous failure of each individual source of funding open to the bank over a period of less than 12 months.

I sincerely hope that my testimony today will be of benefit to the inquiry in fulfilling its mandate.

I would like to say that I fully accept responsibility for my roles as both corporate and director . . . corporate . . . as director of corporate and retail treasury and head of retail banking of Anglo Irish Bank for any part that I may have played in its failure and the consequences it had on the Irish State. It is genuinely something that I will always regret.

Finally, I would like to highlight that at the time of writing and submitting my witness statement to this inquiry, I do not hold any documents or other memoranda such as minutes of meetings from my time in the bank and, therefore, its contents are solely based on my recollection of events at the time. Thank you, Chairman and members of the committee.