Wednesday, 11 February 2009
Question : To ask the Minister for Finance the extent of the knowledge of himself or his Department of the irregular transactions between Anglo Irish Bank and other financial institutions, including the Irish Nationwide Building Society and Irish Life & Permanent, when he proposed to the Houses of the Oireachtas on 20 January 2009 the nationalisation of the Anglo Irish Bank; the full facts now known to him regarding the extent of the irregularities that were apparently endemic in this State-owned bank; the way he proposes to hold accountable those who have abused their positions of trust and responsibility; and if this includes consideration of prosecution through the courts.
Question : To ask the Minister for Finance the communications, if any, which occurred between the financial institutions involved in a major transfer of funds to Anglo Irish Bank on 30 September 2008 and the regulator, the Central Bank, his Department or other representatives of Government; the date on which the communications were made; the actions, if any, which were taken on foot of those communications; the oversight, if any, of how these transactions were presented by Anglo Irish Bank in its accounts; and if he will make a statement on the matter.
Question : To ask the Minister for Finance when he or his Department first became aware of the reported transfer of â¬7 billion from Irish Life & Permanent to Anglo Irish Bank, â¬4 billion of which was transferred on 30 September 2008, the day on which the bank guarantee scheme was announced; the investigation being held into the transfer of these moneys; if his attention has been drawn to any other transfers of money to or from Anglo Irish Bank in or around this time; and if he will make a statement on the matter.
Question : To ask the Minister for Finance his knowledge of the transfer of moneys from Irish Life & Permanent to Anglo Irish Bank; the circumstances in which the matter was brought to his attention; the steps he took as a result; if his attention has been drawn to other transfers from other financial institutions to Anglo Irish Bank; and if he will make a statement on the matter.
Question : To ask the Minister for Finance if he will explain the circumstances surrounding the transfer of â¬7 billion from Irish Life & Permanent to Anglo Irish Bank; if he will clarify the extent of knowledge of this transaction known to Government when DÃ¡il Ãireann decided to nationalise Anglo Irish Bank; if the transfer of the â¬7 billion involved was deemed to be an inter-bank transfer loan or a deposit by Anglo Irish Bank; his views on whether this amounted to creative accountancy giving a clear misrepresentation of the deposit strength of Anglo Irish Bank; the extent and nature of due diligence carried out in respect of Anglo Irish Bank prior to nationalisation; the person by whom and authority by which such due diligence was carried out; if he will make such reports public; if the PricewaterhouseCoopers report informed the Government of the transfer of â¬7 billion to Anglo Irish Bank; if Ernst & Young, in respect of its report on Anglo Irish Bank, informed the Government of the extent of this transfer; when the regulator informed him and the Government of this transaction; if the regulator made his views thereon known to him and Government; the reason the Government saw fit not to inform DÃ¡il Ãireann of the extent of information available to them in regard to Anglo Irish Bank and its circumstances at the point of decision by the Government to nationalise the bank and introduce the Bill for nationalisation to DÃ¡il Ãireann; and if he will make a statement on the matter.
Question : To ask the Minister for Finance if he will provide a full account to DÃ¡il Ãireann in respect of inter-bank loans relating to Anglo Irish Bank; the knowledge he or his Government colleagues have of such loans; the stage at which they became aware of any activity in respect of these loans; if his attention has been drawn to loans between Government Members and Anglo Irish Bank; and if he will make a statement on the matter.
I want to inform Members as to how I intend to proceed from here. I intend to allow the Minister to give an open-ended reply because there are many questions. Then I propose that the time allocated for questions thereafter from those who tabled questions will be two minutes and the Minister will have four minutes in respect of each question. Then I will try, if possible, to get to other Members, but it is only reasonable to say that it will not take longer than, say, one hour.
I do not have the question tabled by Deputy Morgan, and I should appreciate it if I could have a copy.
I have the questions from the other Members and I propose to take all questions together. As Deputies will be aware, the issues referred to in the questions put before the House today are under investigation by various bodies including the Financial Regulator and the Office of the Director of Corporate Enforcement. As I am sure Deputies will appreciate, some of the issues may lead to further action, including criminal proceedings, and in those circumstances it is not appropriate for me to comment in detail on specific issuesââ
However, I would like to outline to the Deputies the Government's approach to date regarding inappropriate practices at Anglo Irish Bank. The obligations and requirements contained in the guarantee scheme gave rise to increased engagement with the covered institutions, which included an assessment of the loan book for the Financial Regulator and capital position of all covered institutions by PricewaterhouseCoopers. This initial assessment was received towards the end of October. The question of financial transactions between Anglo Irish Bank and Irish Life & Permanent was included in the report. The Department of Finance drew this specific matter to the attention of the Financial Regulator when reviewing that report. The circumstances of that transaction remain under review by the regulator. I also understand that the newly appointed board of Anglo Irish Bank is reviewing this matter in the context of finalising the accounts for the year ending 30 September 2008.
As part of the planned recapitalisation of Anglo Irish Bank, a further due diligence exercise was undertaken. Further information was also supplied to my Department by the Financial Regulator and the Central Bank as part of detailed consultations with these bodies regarding the implementation of the scheme and in negotiations on recapitalisation proposals.
As a result of this increased level of engagement with the banks and Anglo Irish Bank in particular, I became aware of certain unacceptable practices at the bank. Those issues include loans to directors and a transaction in September between Anglo Irish Bank and Irish Life & Permanent. Regarding the transaction with Irish Life & Permanent, I am advised that Anglo Irish Bank placed funds with Irish Life & Permanent. A non-bank subsidiary company of Irish Life & Permanent then deposited a similar amount in Anglo Irish Bank as a customer deposit.
The Government made it clear when nationalising Anglo Irish Bank that an important factor in reaching this decision related to concerns over corporate governance issues which were undermining confidence in the bank. The information already in the public domain regarding loans to directors at the bank, and information available to me in the first half of January on the transaction involving Irish Life & Permanent reinforced this decision.
Deputies should note that the bank's annual accounts will be published in the coming weeks and will provide further details on directors' loans as well as the transaction involving Irish Life & Permanent. Matters at Anglo Irish Bank are now the subject of a number of investigations and reviews including those being undertaken by the Financial Regulator and the Office of the Director of Corporate Enforcement. These investigations must be followed up both by the regulatory authorities, which have extensive powers, and by the bank itself. As Minister for Finance and shareholder of the bank, I will ensure, where appropriate, that any issues identified on foot of these investigations are fully addressed and any misconduct of a criminal or civil character is brought to justice or appropriate compensation is received.
The new board is reviewing all the corporate governance practices at the bank and will put arrangements in place to guide Anglo Irish Bank in the future. I have every confidence that this new board will pursue the necessary changes in this regard. In all of this it is important to note that the Government is committed to the stability of the Irish banking system. Depositors and creditors with Irish banks, including those within the full ownership of the State, must be and will be protected.
Naturally Deputies will be anxious to know when exactly I learned of the Anglo Irish Bank â ILP transaction. The matter of financial transactions between Anglo Irish Bank and Irish Life & Permanent was an issue in the PricewaterhouseCoopers report, which was received at the end of October. The Department drew this specific matter to the attention of the Financial Regulator when reviewing the report. The circumstances of that transaction remain under review by the regulator. The matter was one of the corporate governance issues at Anglo Irish Bank, which were an important part of the Government's decision to take the bank into public ownership, to ensure the instability such corporate governance issues can cause would not threaten the stability of our financial system, generally.
I made it clear at the time of the announcement of the decision to take Anglo Irish Bank into public ownership that a key element of the Government's decision was concern that corporate governance issues at Anglo Irish Bank could destabilise the bank and threaten the stability of the financial system. This transaction was one of those corporate governance issues. It would not have been appropriate for me to publicly disclose partial information which was and remains the subject of an investigation by the responsible statutory authority, the Financial Regulator. The investigation is ongoing into these matters. It will determine whether legal or regulatory codes were breached. If legal or regulatory issues arise, then due process will be followed in bringing any parties responsible to account.
Is the Minister confirming that â¬4 billion was deposited on 30 September, the day the bank's financial year ended, and hours after the Government's guarantee to the banks was announced? Does the Minister recognise that this will be seen right across the board as an exercise in cooking the books and that another financial institution, Irish Life & Permanent, was knowingly involved as it withdrew the deposit some seven days later?
Is it not the case that Anglo Irish Bank wanted to avoid collapse and to benefit from the State guarantee, used a deceptive financial ruse to achieve this and that the Irish taxpayer has been the victim of that deception? The Minister has indicated he became aware of this before the end of October 2008. A question put to him on 20 January by me and others, when he rose to propose the nationalisation of Anglo Irish Bank, was specifically about whether there was other relevant information this House should know before giving active consideration to the proposal. The Minister withheld that information from this House. Did he brief his Cabinet colleagues of this detail he is now confirming he was aware of, from October 2008? Did he brief his party? Did he brief the Green Party, and when did it become aware of this? Will he advise the House of the disclosure of this information to each of those elements of Government? Will he clarify once again when the Financial Regulator became aware of this?
I will conclude by asking the steps he now proposes to take to explore the complicit roles of the other main financial institutions, namely, Irish Nationwide in respect of Mr. FitzPatrick, Irish Life & Permanent in regard to this transfer of funds in September and any additional relationship that may exist between Anglo Irish Bank and other financial institutions.
He has suggested that he is constrained because of possible later actions but the House and the people deserve a factual account of the steps he is taking or intends to take in respect of those executives and other individuals who were involved in what can at best be described as highly irregular activitiesââ
Deputy Ã CaolÃ¡in opened his questions by referring to the exposure to the taxpayer. I assure the House that there has been no taxpayer exposure whatsoever to date at Anglo Irish Bank.
However, huge damage has been done to the reputation of this country by the various activities which took place in the bank. The Deputy pursued the question of my own awareness of this particular matter and I indicated in my reply that I did not become aware of it until the middle of January of this year. Information about the transaction was contained in the extensive PricewaterhouseCoopers report and was referred by my Department to the regulator at that stage in the autumn of last year but the specific character of this transaction was explained to me in the middle of January by my officials.
It was one of the factors which led me to the conclusion that I should recommend to my colleagues the nationalisation of the bank. However, because it was a matter pertaining to a customer of the bank, I did not put it before my colleagues or the Taoiseach in explicit terms because confidence in a bank over which we have now taken ownership would be shattered if the Minister for Finance publicly and with abandon disclosed the confidential arrangements made between a bank and its customers.
I immediately insisted that the matter be reported back to me by the board of the bank. As Deputies will be aware, that board was reconstituted immediately following the bank's nationalisation. The board indicated to me that it intended to put the matter into the public domain with its annual report. That is the position in respect of this matter.
I agree with Deputy Ã CaolÃ¡in that if the necessary investigations now being undertaken by the Financial Regulator and the Office of the Director of Corporate Enforcement disclose wrongdoing of a civil or criminal character, these must be pursued. If they disclose civil wrongdoing, in respect of which I am aware the board of the bank is taking legal advice, those who as a result owe money to the bank must be pursued. If criminal misconduct is disclosed as a result of the investigations of the Office of the Director of Corporate Enforcement, criminal proceedings must and will be taken. As Deputies will appreciate, that office has a very good record in the prosecution of corporate crime. In regard to this and other transactions at Anglo Irish Bank, all these matters have to be investigated and the director himself makes these decisions. Neither the Government nor this House can direct the taking of a prosecution in this country. It is the responsibility of the director to do that. It is also his responsibility to determine whether it is appropriate to ask the High Court to appoint an inspector to investigate the circumstances of the bank generally. Were he to so decide, naturally I have reviewed the legislation with the TÃ¡naiste and any legislative amendment necessary to facilitate a more extensive investigation would be enacted. However, it is not my function nor is it the function of the Government or this House to direct the director to take a prosecution or to apply to the High Court for the appointment of an inspector. Clearly, if these steps are warranted they must be taken and any wrongdoing at this bank must be pursued to the ultimate degree.
I wish to ask the Minister a number of questions arising from his reply. He indicated that the PricewaterhouseCoopers report of October contained this information but he did know about it until January. Did he not read the report? Did his Department regard this as so trivial that his officials did not bring it to his attention if he did not read the report himself? Did this transaction, which he noted in his earlier reply was described as a customer deposit even though it clearly was not such a deposit in any normal sense, not ring alarm bells?
When he proposed on 21 December to put â¬1.5 billion into Anglo Irish Bank, did nobody from the Financial Regulator or his Department inform the Minister that the serious issues which had arisen in the way the bank had been behaving were reason for pausing before investing taxpayers' money as if it were a sound bank with a long-term future? The Minister indicated that reputational damage was the reason he moved from putting in the cash to nationalising the bank but it would now appear that much of the information about the reputational damage was known by his Department and the regulator, without anything being done about it.
Why did the Minister feel that he should not reveal this information to the DÃ¡il when we were debating the nationalisation of Anglo Irish Bank? The House was quite divided on the nature of the legislation and the appropriateness of the protections that were being included. My own party indicated that an orderly wind-down was appropriate for a bank that had been seriously damaged. Why was this not revealed to the DÃ¡il at a time when serious decisions were being made that put taxpayers' money at risk?
My officials were concerned about the matter and they referred it to the regulator. In regard to the position of the banking sector, throughout the time since my appointment in 2008 the sector was in a state of considerable fragility.
The sector was certainly encouraged by the Central Bank and the Financial Regulator to engage in whatever liquidity operations were possible to protect the various banking institutions. The transaction did not appear on the face of it to be immediately culpable and that was the position in regard to it initially.
ââit was not taken into account at that stage because it was still under investigation by the regulator.
Regarding the decision on capitalisation, â¬1.5 billion was at that stage the recommended figure to generate sufficient confidence in the institution to maintain its financial stability. On foot of the decision to capitalise, a more extensive and intensive due diligence investigation was carried out and on that basis more precise facts on the transaction were brought to my attention in the middle of last month. That was one of the factors I took into account in making a recommendation to the Government.
I am sure Deputy Bruton is aware that matters relating to customers' deposits and dealings between customers and banks are necessarily confidential in character and cannot be put by me into the public domain in the absence of a concluded investigation. The investigations into this matter had not concluded but the provisional information available to me in the middle of January was sufficient to satisfy me there would a risk to the taxpayer in this and in the loan transactionââ
Let me finish. In all these transactions, the issues raised involving corporate governance were such that I had to advise the Government and Taoiseach, who was abroad at the time, of them. In regard to this issue, I simply left the matter with my colleagues as a general issue of corporate governance and then proceeded with introduction of the Bill on nationalisation in this House. I explained to the House that there were issues of corporate governance at Anglo Irish Bank.
I would like to retrace with the Minister how this came about. I understand from what he said that this loan was reported in the PricewaterhouseCoopers report which his Department received in October. The Minister stated his officials thought this sufficiently serious they requested the Financial Regulator to investigate the matter but that they did not bring it to his attention until January. Is that correct?
Am I correct that the Minister read only the sections of the PricewaterhouseCoopers report which were drawn to his attention or highlighted by his Department, that the Department was considering a recapitalisation of this bank prior to the decision on nationalisation, that in the context of that recapitalisation nobody drew this matter to the Minister's attention and that nobody prior to the taking of the decision on recapitalisation or the decision to nationalise decided to obtain a report from the regulator on the outcome of his investigation in regard to this loan? Is that the position?
Is it the case that the Minister knew about this transfer when he came into this House with a proposal to nationalise Anglo Irish Bank and did not tell the House about it? This does not inspire confidence in anybody. I draw the Minister's attention to the letter sent by the Taoiseach to Deputy Kenny and me in advance of the nationalisation debate cautioning us on the need for responsibility. What was most important was that the Minister for Finance inform us of what was going on. The Minister stated, if I understand him correctly, that Anglo Irish Bank placed funds in a subsidiary of Irish Life & Permanent and that Irish Life & Permanent then deposited a similar amount of funds in Anglo Irish Bank. Can the Minister provide us with the amounts involved in both transactions?
My Department is in constant contact with the Financial Regulator and refers matters to him on an ongoing basis. There is nothing unusual in my Department referring a matter to the Financial Regulator. It would not be the practice for my Department to always advise me of what matters have been referred to the Financial Regulator.
As I outlined to the House, my Department queries a constant stream of matters with the Financial Regulator. It is not unusual for my Department â in fact it is quite common â not to advise me of all matters that are referred to the Financial Regulator. There is nothing unusual in a reference to the Financial Regulator.
With regard to the transaction in question, as I said already, throughout last year the institutions were in a stressed condition and requests were made by the Central Bank and the Financial Regulator for the institutions to support themselves. That is not a feature of banking practice unique to Ireland. A feature of banking practice which took place in all European countries last year and this year was requests that banks mutually support each other in the context of their liquidity.
The transaction identified in the report excited interest in my Department and was referred to the Financial Regulator. The Financial Regulator has not to date reported on the transaction. When the matter came to my attention in January I insisted that following nationalisation of the bank, the incoming board would deal with this issue and it has done so. On the amounts involved, I cannot provide that information today. Obviously, the information I have given is put on the record of the House with the consent of the bank.
Did the Minister read the full report presented by PricewaterhouseCoopers which dealt with all the due diligence examinations in respect of all covered institutions and identified, in particular, risk factors for the taxpayer in the context of the guarantee? Did the Minister say he read the full report or that officials presented him with summaries or blanked or highlighted sections of part of the report?
Will the Minister explain the transaction again? He suggests that Anglo Irish Bank placed funds in what he described as a "customer account" in Irish Life & Permanent. That is not banking practice; these are corporate accounts. Why does the Minister use the term "customer"ââ
No. I have some experience of merchant banking. This is not a little old lady walking into the bank with a handbag containing â¬5,000 or â¬10,000. These are deposits of â¬3 billion and â¬4 billion, a total of â¬7 billion. The Minister describes this in a particular way. I would like him to take us through the process again. Why does he call the accounts "customer" accounts when they are major wholesale industrial deposits by other banks? Will the Minister agree this would be a big item on the bank's balance sheet?
The Minister said there was a back-to-back transaction.
Anglo Irish Bank put money into Irish Life & Permanent and it, back-to-back, put money into Anglo Irish Bank. That is similar to what happened at Enron. Does the Minister understand that? Why is it his officials did not inform him about this? How could the Minister not have been aware of this given the systemic risk to Ireland's reputation were this information to come out?
There are now four inquiries into practices at Anglo Irish Bank, namely, Mr. FitzPatrick's loans, the directors' loans, the Quinn company and contracts for difference and, possibly most important, window dressing through Enron-style accounting of back-to-back transactions with another bank. Is the Minister aware of any other back-to-back transactionsââ
This was described in the report as an issue. On that basis, my Department referred it to the Financial Regulator.
On the precise details of the transaction, I reiterate what I have already put on the record of the House. On the transaction with Irish Life & Permanent, I am advised that Anglo Irish Bank placed funds with Irish Life & Permanent. A non-bank subsidiary company of Irish Life & Permanent then deposited a similar amount in Anglo Irish Bank as a customer deposit.
Deputy Burton rightly points out that most of us â all of us in this House, I hope â are concerned with little old ladies who deposit funds in banks, but their customers include corporations and, on that basis, it is described as a customer in that respect.
If Deputy Burton studies my reply, she will see I am advised that Anglo Irish Bank placed funds with Irish Life & Permanent and that a non-bank subsidiary company of Irish Life & Permanent then deposited a similar amount in Anglo Irish Bank as a customer deposit.
In regard to major wholesale deposits by other banks, I am glad the Deputy has acknowledged their existence at Anglo Irish Bank because, of course, it is one of the reasons it is essential to safeguard the banking system because of the degree of default which would happen were the bank to have been let go to the wall at any stage.
The Minister, Deputy Brian Lenihan, is a man of integrity. There is a lesson here for everybody. The Minister did not read the full report but the politics of his ministerial office should have put him on alert when his officials told him a section of this report should be referred to the regulator. He should have asked the reason for the referral and the alarm bells should have gone off at that stage.
While stressing that the Minister is a person of integrity, he might explain to the House why the perception outside in the real world is that there has been some kind of cover-up in that the Government did not bring to the attention of the House the information it was aware of at the time of the nationalisation of Anglo Irish Bank. Irish Life & Permanent issued a statement saying this transfer took place in somewhat exceptional circumstances. What are these exceptional circumstances? Can the Minister explain how a double transfer took place from Anglo Irish Bank to Irish Life & Permanent and vice versa? This did not happen by coincidence. Clearly, there was contact between the two financial institutions so that it would happen.
The Minister stated that an investigation is under way and that if criminal activity is involved, it will be pursued to finality and rightly so. Does he have a suspicion criminal activity was taking place? It is normal in the financial world that inter-bank transfers take place but, given his comment that if criminal activity is involved he will pursue it, does he have a suspicion, assumption or perception, or have some of those officials brought to his attention an indication that criminal activity might well have been involved, and in what circumstances would that happen given the back-to-back transfer?
This was the subject of an incorporeal decision by the Cabinet. The Taoiseach was in Japan and was in constant contact with the Minister of Finance, or at least this is what I understand from newspaper reports. When was the Green Party informed of the eventual decision to arrive at a decision for nationalisation? Was the entire Cabinet up to date on this matter?
In the context of the nationalisation, the Minister has said he did not have the full picture. Why was the House not informed of the extent of the picture he had? This is why people outside the House say this is a continuation of business as usual and protection of what was there. It is the Minister's job to smash that wide open in terms of transparency and accountability, and to prove to the people of the country that there will be no cover-ups during his time as Minister for Finance.
A number of good questions have been put by Deputy Kenny which give me the opportunity to put matters on the record of the House. First, there was a Cabinet meeting which arrived at the decision to nationalise Anglo Irish Bank. The various newspaper reports that it was a purely incorporeal meeting are inaccurate. The matter was of some urgency and the Taoiseach was in Japan but a meeting of the Cabinet took place and was presided over by the TÃ¡naiste. A number of Ministers were present and at all stages our colleagues in Government from the Green Party participated in these decisions and were fully informed of them.
I dealt with that matter earlier. The decision, therefore, was not an incorporeal decision of the Cabinet. It was a full decision of the Government but, naturally, the Taoiseach was kept apprised of developments in the matter up to the time of the Cabinet meeting.
In regard to the suggestion of criminal activity, I was speaking in regard to corporate malpractice generally in Anglo Irish Bank, not specifically in regard to this particular transaction. Even at this stage I have no evidence before me of any suggestion of criminal culpability in regard to this transaction. In regard to the loan transactions, I have no evidence, even at this point, that there was criminal activity disclosed in that regard.
In regard to the acquisition of shares by a bank where the acquisition is financed by the institution â by the company itself â otherwise than lawfully, and there are circumstances where it can happen lawfully, then clearly, were that to have happened, there could be an issue of criminal liability. I want to put on the record of the House that I am not suggesting there is any information to hand at this stage that suggests criminal activity in regard to this transaction. However, I reassured the House in response to the question put by Deputy Ã CaolÃ¡in that if criminal conduct is disclosed, it is dealt with and I outlined the machinery for dealing with it.
In regard to the report by PricewaterhouseCoopers, Deputy Kenny will be aware, having served as a Minister, that officials brief Ministers extensively on reports. I was briefed extensively by my officials on the PricewaterhouseCoopers report, not just on one occasion but on several occasions before meeting various institutions, including this institution.
I was advised in the course of January that it was viewed as a matter of a more serious character. That was one of the issues I took into account in deciding to recommend to my colleagues that the institution should be nationalised.
Will the Minister explain why he decided to nationalise Anglo Irish Bank when he learned of these irregular loans, rather than deciding on the opposite course of action and allowing the bank to wind down? Many of us believe that would have been the correct action to take.
The Minister says there is no culpability but there were very serious goings on, of which he was aware. Why did he not wait for the outcome of those reports before deciding to nationalise?
What is the current status of the Anglo Irish Bank Corporation Act given the Minister withheld information from the DÃ¡il in regard to very important matters at the time of the DÃ¡il debate? Is that Act now open to constitutional challenge as a result of his withholding that information from the DÃ¡il?
The Minister alluded to my colleague's question. When did the Minister inform the Government members of his coalition partner about these irregularities in Anglo Irish Bank? Was it before or after they agreed to proceed to nationalisation that they were aware of this toxic and irregular activity?
Are there further toxic announcements to come in regard to this or any other bank? Perhaps the Minister will explain whether he is aware we are the laughing stock of Europe because of all of these activities. When we compare and contrast the reaction of the State to these people to that of the American authorities to Enronââ
If Deputy Morgan will allow me a little time, I should have said in reply to Deputy Bruton that the PricewaterhouseCoopers report contains 120 pages on each financial institution, so it is a very long report and it was essential that I be briefed on parts of it. I worked my way through substantial parts of it and, to be honest, there were large parts of it which I wanted to forget because they contained details about individual customers of the relevant financial institutions.
I refer to the questions posed by Deputy Morgan. The Deputy should stop this business of saying that the bank should not have been nationalised. Whatever the future of the bank, it had to be nationalised to protect the stability of the financial system. There was no other option. If we had taken the course of action advocated by Deputy Morgan, that is, to immediately wind up the institution, Ireland would have immediately taken a hit of many billions of euro throughout companies, banks, individual customers, hospitals and credit unions.
That course of action was not an option for the Government. The Government attempted to maintain this institution as a going concern on a capitalised basis with 75% control by the State. That did not command market confidence. In the absence of that measure commanding market confidence and in the possession of information concerning the fragility of its liquidity and corporate governance issues which had arisen, the best course was to recommend to Government the nationalisation of the institution. I have not heard any alternative course advocated on the other side of the House that would have secured the interests of the people, the economy, jobs in the country and the taxpayer to any greater effect.
I refer to the PricewaterhouseCoopers report. Will the Minister place the report in the Oireachtas Library now that the Anglo Irish Bank has been nationalised and is, therefore, the property of the people? At least, the House should have the privilege of examining it. The Minister stated that following nationalisation he brought to the attention of the board the issue of the â¬7 billion. Is it not strange that the first time the Minister decided to act on the matter was following the nationalisation? His officials had referred the matter to the Financial Regulator already, some three or four months earlier. Was the Minister in possession of a report from the regulator, prior to appearing before the House, regarding the proposals to nationalise Anglo Irish Bank, that might have been relevant to the Members of the House before they voted on the matter?
I agree with Deputy Kenny that the Minister's integrity is not in question. I imagine he is over-stretched, as are his officials. However the Minister has put himself at risk with the answers provided to the House this afternoon. We are both agreed that the reason the Minister took his stated position on 29 September was because of the rumours that were rife concerning Anglo Irish Bank, the crashing share price and the knock-on effects of these on the banking system. In any case, that is what the Minister told the House. Then, the Minister was unable to answer certain questions and he informed the House he engaged PricewaterhouseCoopers to find out the answers. Now, it seems he is telling the House that when he received the PricewaterhouseCoopers report, he read extensive tracts, but not this particular tract. He seems to be saying this matter was not considered a risk factor.
The Minister must explain to the House how his officials came to that conclusion. How did the officials decide that this matter ought immediately be referred to the Financial Regulator, but kept from the Minister for Finance? How could the Minister's officials decide to conceal this critical information from him? How could the Minister regard what Deputy Burton has described as this Enron-style ruse at deception as just another customer that he would like to forget about? The Minister had no wish to race through the pages of the report naming the bank's customers. He preferred to forget them. How could he forget this one? The Minister must attempt to explain to the House a second time how he has risked so much taxpayers' money in rescuing this bank in circumstances in which he initially did not bother to read the relevant section of the report, and then when he did become aware of the position, he proceeded anyway with the measures to nationalise the bank.
I cannot understand how the Department could have acted in this way, given the anxiety that must have awaited the completion of the PricewaterhouseCoopers report. The Department must have been very keen to read its contents and its conclusions, to determine whether the bank was solvent, to ascertain the loan to deposits ratio, and other critical questions. However, the officials decided to refer this critical question to the Financial Regulator, but not to the Minister and kept the details from him. Can the Minister explain this?
I would be very pleased to do so. However, I will first address Deputy Costello's questions. As I indicated in my reply, I instructed my officials that the new board should deal with this matter. To date we have not received a report from the Financial Regulator on this matter. Deputy Costello will appreciate that the old board of Anglo Irish Bank stayed in operation until the institution was nationalised by the Houses. The old board was in existence until the President signed the legislation and a new board was constituted by the Government. That was a new board, distinct from that which existed for most of the month of January.
Mr. O'Connor, who became chairman in late December, liaised with my Department on the matters under discussion and they were brought to my attention. He was dealing with these matters. However, there was considerable uncertainty about the corporate future of Anglo Irish Bank until the nationalisation Bill was enacted. I advised my officials to raise the matter with the board members upon their entry into office. It was my responsibility as Minister for Finance to appoint a new board once the bank was nationalised. I am trying to explain that the context in which the question is asked is not quite relevant.
Mr. O'Connor, in whom I had full confidence, was dealing with the matter. Once I was apprised of the matter, I suggested to my officials that the board was obliged to deal with this matter in conjunction with the regulator.
That is why the board proposed to put these matters into the public domain upon the publication of the annual report.
I refer to Deputy Rabbitte's questions. He raised the question of the meeting on 29 September and the Government decision to guarantee the banking system. There was a concern on 29 September that a nationalisation of Anglo Irish Bank would have a knock-on effect on the entire banking system, because of the very critical liquidity position of all the banks that evening. The approach to the Taoiseach and me regarding the guarantee was made by the chairman and chief executive of the Bank of Ireland and the Allied Irish Banks. I put that on the record of the House in the course of the guarantee debates. I received no representations whatsoever from the Anglo Irish Bank about the extension of a guarantee to it, or about its possible nationalisation at that time.
I received no representations from the bank other than one representation on the sole occasion on which I met Mr. FitzPatrick, prior to 30 September, in which he suggested he would be interested in taking over the Irish Nationwide Building Society.
I discussed this matter with my officials and suggested it might not be a wise course of action at the time. That was the sole occasion since my appointment as Minister for Finance on which I met Mr. FitzPatrick. I met him, of course, on two subsequent occasions, after 30 September, with my officials, to discuss the future of the institution.
It is important to recall the focus of the PricewaterhouseCoopers report. It was a due diligence exercise on the loan quality of financial institutions but naturally inquiries were made in this report of other features. This was another feature which emerged and was viewed and described in the report as an issue. It was not listed in the report as a risk factor. When I told the House a few minutes ago that this was not viewed as a risk factor that was what was stated in the report. It was described simply as an issue to be pursued and my Department did pursue it. That was written in the report. Did the Deputy have another query about nationalisation and proceeding with nationalisation?
The Minister said that his officials briefed him extensively. How in the name of God could they have briefed him extensively and not brought this to his attention? Why did he not meet with the authors of the report? This is a serious matter.
The Minister will recall that not long ago we gave Deputy MicheÃ¡l Martin a fool's pardon when he had not read the papers about the nursing homes.
The decision on the guarantee was taken on 30 September, not on receipt of the PricewaterhouseCoopers report. That was an exercise to assess the loan quality of the financial institution.
I met the author of the report but the focus of the report was on the loan quality of the institution. Naturally, deposits were not examined in the same detail in that report.
The issue was identified in express terms as one which the Department should pursue. It was not even expressly identified as a risk factor in the report. When the offer was made to Anglo Irish Bank, however, in respect of the â¬1.5 billion, that was on the basis that the State would continue with the due diligence process with a more extensive and intrusive investigation into the affairs of Anglo Irish Bank covering deposits as well as the loan book and all the other features of the institution. At the conclusion of that due diligence my officials advised me about this issue. It was one of the issues which I took into account in recommending to my colleagues that the institution should be nationalised.
It is important to remember that the due diligence, which was instituted after the offer to capitalise Anglo Irish Bank for a 75% return, focussed on the deposit base as well as the loan book of the bank.
The debate has run for an hour but several Deputies are offering. I will give them the opportunity to speak in this order: Deputy O'Donnell, Deputy Ã CaolÃ¡in, Deputy Gilmore, Deputy Burton and Deputy O'Dowd.
I have here the preliminary results for Anglo Irish Bank for 2008, published on 2 December. When will the audit be concluded? We now control the bank but the audit is yet to be concluded.
This transaction came from a non-bank subsidiary of Irish Life & Permanent so that it could be classified under customer accounts rather than banks which would appear less risky to the international market. Does the Minister agree that this was done for no reason other than concealment? I cannot understand how it was not highlighted as a major risk issue in the PricewaterhouseCoopers report. We would like to see that report.
This Minister found and pored over the Anglo Irish Bank report in respect of the director's loans for SeÃ¡n FitzPatrick. The PricewaterhouseCoopers report that the Minister commissioned is 120 pages long. It was like the Holy Grail. I would have thought the Minister would have wished to read the report in depth.
I cannot understand how the Minister read the Anglo Irish Bank annual report but will not state that he has read the PricewaterhouseCoopers report. When did he inform the Taoiseach about this loan transaction? What was the purpose of the transaction between the subsidiary of Irish Life & Permanent and Anglo Irish Bank?
When the Second Stage debate on the Central Bank and Financial Services Authority of Ireland Bill was held here seven years ago, I pointed out that not only did the Central Bank allow the DIRT fraud to flourish but it lobbied Government not to intervene claiming that to do so would encourage a flight of money from the economy.
Given that the Central Bank was prepared to turn a blind eye to that scandal I queried at the time what other failings there were in its operations. Seven years later we are concerned here with the replacement brought in by that legislation in 2002, a new regulatory regime that was lauded at the time by the Government as one that would deal with all of these problems.
It is clear that the Office of the Financial Regulator has failed to live up to Government expectations, I expect, and certainly those of all Opposition voices here and the electorate. What will the Minister do to ensure public confidence in a regulatory regime in respect of the banks and financial institutions?
The intention is to publish the annual report at some stage after 20 February 2009. It will be published as soon as possible after that date. In response to Deputies O'Donnell and Costello, the PricewaterhouseCoopers report contains a great deal of confidential information about individual customers of the bank.
I am examining whether it will be possible, in respect of the bank in which the State is a shareholder, to publish the maximum amount possible, consistent with the protection of the necessary confidentiality which must exist between a customer and a bank in an institution which we now own, and to do that when the annual report is published.
The report contains 120 pages on each of the financial institutions. I was briefed extensively on it. The focus was on the quality of the loan books because understandably, our concern was to ensure what exposures arose in the institutions there in terms of our guarantee. The deposit issue was noted but described as an issue to be taken up by the Department and was so taken up. I cannot give the House a finalised view on the reason for the transaction today. It is clear that there were major liquidity support operations mounted between institutions in the past year but to the extent that this may have gone beyond that activity it is a serious matter and will require a comprehensive explanation from the parties concerned. Those investigations are ongoing and I cannot prejudge them.
On a more constructive note, I agree with Deputy Ã CaolÃ¡in that it is of fundamental importance that we reform the regulatory system. I will listen to all sides of the House in the progression of that reform. The current architecture and system did not serve the country well when it entered this financial crisis. The arrangement which was arrived at, whereby the Central Bank was co-located with the Financial Regulator but each operated autonomously, does not appear to have served the country well in recent months and years. It is known in the public domain that the Central Bank assessed the dangers of excessive lending long before the regulator but was unable to force its will in that regard. There has always been a demand for a separate system of financial regulation because of the fear that a central bank would be concerned primarily with prudential considerations but whatever may have happened, it is essential that we devise a structure that commands public confidence for the future. Many of the decisions that will have to be taken in that regard relate to men and women, rather than measures, but measures may be required as well.
We are coming to the end of this round of questions and I have listened very carefully to what the Minister has had to say. The replies that he has given to us this afternoon raise the most serious questions about his performance in his office, and the most serious questions about his future in that office.
I am coming to a question. The State has given an extraordinarily generous guarantee to the banking system. PricewaterhouseCoopers was appointed to examine the financial state of the banks and what we had got ourselves into. It beggars belief that the Minister did not read the PricewaterhouseCoopers report, even if one accepts that he was very stretched on time during the period concerned. It is unbelievable that he would not have read the section of the report about Anglo Irish Bank, and that we have ended up in a situationââ-
He did say that. He stated that he did not read what was in the report about this loan, and that it was not drawn to his attention. He said that his officials reported it to the Financial Regulator but did not bring it to his attention. He told us that this report came before his Department in October and that he did not know about this loan until January. He has explained why. We know that he did not inform the House about this loan before the nationalisation of Anglo Irish Bank. Did he inform the Government about the existence of this loan before it made the decision to approve the legislation to nationalise the bank?
I stated that I had not read the entirety of the report, which contained 120 pages on each of six financial institutions, that I had been briefed extensively by my officials on it, that I had met the author of the report and that the matter was listed in the report as an issue to be addressed by the Department, and not a risk factor. Naturally, my concern was directed at risk factors, as should be the case for any Minister for Finance and as pointed out by the Deputy in the opening preamble to his questions. In looking at a 720 page report on the Irish banking system, a Minister for Finance will focus on risk factors.
The Deputy was concerned about the position of the guarantee and the issues were supplemented by very generous and extensive briefings by my officials on this matter. When the matter was drawn to my attention in January, I took a decision to recommend to my colleagues that we should nationalise this institution, which I believe was the correct decision. Deputy Gilmore cannot point to a cent of taxpayers' money that has been wasted as a result of the decisions I have taken in this whole matter. His party characterised the guarantee as a generous one. The taxpayer has received money for the guarantee.
The Labour Party decided not to support the guarantee so that Deputy Gilmore can quietly go around the country saying that the Government is bailing out the banks and not worrying about anything else.
I made it clear in my earlier replies that I had advised my colleagues that there were issues of concern on corporate governance and that investigations were ongoing, but I did not disclose to the Taoiseach or my colleagues the particular circumstances of this particular transaction.
I understand that the Financial Regulator and the Department of Finance were aware from late 2007 and early 2008 of the issues relating to SeÃ¡n Quinn and that there were grave concerns about the Quinn family group of companies and the contracts for difference. However, there were also difficulties with Anglo Irish Bank and the fact that it was being problematic. Would the Minister confirm that those difficulties became acute and that he was briefed on them by his officials on taking office? In that context, when he asked us in the DÃ¡il on 29 September â the day before Anglo Irish Bank's year end, as I pointed out then â to guarantee â¬440 billion of deposits, was there somebody somewhere in the bowels of the Civil Service, the Irish Financial Services Regulatory Authority, the Central Bank or the Government who cast an eye over the quality of those deposits, as well as the quality of the assets and the lending to construction firms for development?
The amount involved was â¬7 billion. It seems to have come in two lumps of â¬3 billion and â¬4 billion. Did they amount to 3% of the bank's commercial deposits? They did not come from ordinary customers. The Minister stated that Anglo Irish Bank put money in Irish Life & Permanent. Did that, therefore, also create a deposit of â¬7 billion in Irish Life & Permanent to inflate that bank's balance sheet? That money went bank onto the balance sheet of Anglo Irish Bank through a company of Irish Life & Permanent. Who owned this company or what was the company vehicle? How come the board of Irish Life & Permanent received â¬7 billion and then a company connected to Irish Life & Permanent â possibly a subsidiary â sent the money back? That actually amounts to â¬14 billion which was guaranteed that week by the Government. Did the Minister not actually check that?
He did not read the report in full. Why was the report on Anglo Irish Bank not red letter reading? This was the bank about which everybody was most worried. Why did the Minister not sit down and read the report, and then have a thorough briefing on every angle from his officials? We know he was under pressure, but this was the bank that set all the alarm bells ringing.
How many copies of the PricewaterhouseCoopers report were delivered to his Department? When was a copy of the report given to the Taoiseach? Did he get a separate copy of the report? The world is in a financial crisis, as is our country. The Minister has plenty of advisers to brief him, but the buck stops with him. Does he think it is credible that he did not read every one of those 720 pages? There is no excuse for him not to have done so, because that is what he is paid to do. Regardless of the personal pressure that was on him at a time of crisis, the Minister did not do his job. He has brought his position as Minister for Finance into absolute disrepute. As a result, does he not think he should consider his position as a member of the Government?
I assure him that my officials briefed me extensively on this report and on the risks associated with all the institutions concerned. I received extensive briefings on all six financial institutions.
That is an important question. I am glad it has been asked because it gives me an opportunity to put on the record of the House the fact that there is no evidence of similar transactions in the Irish banking system. Before the Government at present is the important question of the capitalisation of the Bank of Ireland and the Allied Irish Banks. If there is one disappointing feature of this whole businessââ