ANGLO IRISH Bank’s proposed rescue plan for Quinn Insurance could succeed if it satisfied the Financial Regulator’s concerns, according to the head of financial regulation Matthew Elderfield.

The bank would need to resolve solvency, governance and management controls issues at the insurer and prove its own fitness and probity to take over the company, Mr Elderfield told the Dáil Public Accounts Committee yesterday.

Anglo would need to tease out whether it could take over Quinn Insurance in partnership with an international insurer. He queried whether this was appropriate, as Anglo had “an awful lot on its plate” and was “challenged”.

“It is possible the Anglo transaction could be successful – I would say frankly that there are more hurdles to jump than if there was a straight transaction with another insurance company,” he said.

Parts of Quinn Insurance may be sold to an Irish or foreign bidder, he said, and 40 approaches had been made by “very substantial insurance companies”, private equity firms and Anglo.

The Quinn Group had agreed to sell its financial services companies, including Quinn Insurance, he said, and the firm’s administrators would increase the pace of the sale process if the group moved too slowly to sell the company.

Mr Elderfield said the regulator could not have allowed the firm to continue to write unprofitable business in the UK when it had “a hole” in its balance sheet.

He said Quinn Insurance lost €44 million last year, and that guarantees provided on Quinn Group debts had wiped out the insurer’s solvency reserves, leaving a €270 million deficit.

Mr Elderfield said the regulator received an actuarial analysis and increased pricing from the joint administrators of Quinn Insurance on Wednesday with a view to seeking approval to reopen the commercial business in the UK.

The regulator would have to consult the UK regulator before reopening the business, and this could take time, he added.

He sympathised with the plight of 2,450 employees at the insurer, 900 of whom are facing redundancy, but did not think the reopening of the UK commercial division would reduce the job cuts.

Quinn Insurance did not have an in-house actuary to price risk, said Mr Elderfield, which was “not best practice by any means”.

The regulator planned to increase staff from 370 to about 700 – including 155 initially – depending on its requirements, once it assessed its risk-based approach to supervising almost 14,000 firms.

Financial regulation “had been done on the cheap in Ireland”, and the country has had to pay a very high price, he said. The regulator had been “caught off guard by the force and severity of the crisis”.

He blamed “an unholy trinity of bad rules, bad resources and bad attitude” for the banking crisis.

Staffing levels had been “much too low”, he said, and with two supervisors monitoring two of the State’s largest banks, the regulator had been “hopelessly outgunned”.

He planned to increase the monitoring teams to nine staff for the big banks. “The resources is what worries me the most,” he said.

Mr Elderfield said he hoped to hire staff with “front-line”experience, and “senior grey hairs” who had boardroom experience.

He wanted the regulator to adopt “a policy of early intervention” to become “a bit pushy”, and to undertake “deep dive audits” into specific issues. “Hot asset growth should be a red flag.”

Auditors faced “searching questions” on their role in the crisis.

The cost of Anglo was “manageable” but “unpalatable”. “We need to find the lowest cost solution for a very big mess,” he said. There may be “a very tiny corner of this very big bank that could make money”.

New rules on corporate governance were “aimed to attack” over-dominant chief executives, he said.