AIB’s former group chief credit officer was told to “suck it up and get on with it” when he complained about weak risk controls and a lack of resources during 2007.
Kieran Bennett, who was appointed in the first quarter of 2007, made the claim in a written statement given to the Oireachtas Banking Inquiry and published yesterday.
Mr Bennett said AIB’s “divisional culture” at the time meant that the chief credit officer was not a member of the group executive committee and was only an “attendee” rather than a full member of the risk management committee.
He said this structure, coupled with a focus on property-led asset growth, resulted in a “lack of power at the centre”, with the result that the “fundamentals of credit oversight and control were much weakened”.
Mr Bennett's statement was one of four given to the inquiry by former AIB executives or non-executive directors.
Economist Jim O’Leary, who served as a non-executive director for six years from January 2002, apologised for his role in the mistakes made by AIB and said he should have been “more alert” to the “mounting evidence of a credit-fuelled property boom”.
“I accept my share of responsibility for those mistakes and wish to put on the record my profound sorrow for the consequences that have ensued for this country and its citizens.”
‘Big and costly mistakes’
Mr O’Leary said AIB’s board made some “big and costly mistakes” up to his departure in April 2008.
“The biggest and most costly of them was to pay insufficient attention to the bank’s large and growing property loan portfolio, and to accept too readily management assurances that the risks attaching to this portfolio were being properly measured, monitored and managed,” he said.
In addition, Mr O’Leary said the activities of competitors influenced decisions made by AIB.
Separately, Colm Doherty, who ran AIB’s capital markets division for 10 years up to November 2009 before becoming the group’s managing director until late 2010, recalled a review of the culture within the bank being conducted in 2004 following various scandals in its Irish and US businesses.
He said from that point on, the ethics and values at AIB were well defined and appropriate written policies were put in place.
Mr Doherty said it is now clear there were "major failings" in the approach to credit management at both the group and Republic of Ireland (ROI) divisional level.
There was a lack of “red flags” raised by the group chief risk officer and the head of internal audit regarding key issues in the ROI business.
“It was not until the third quarter of 2008 as the Irish economy deteriorated that we began to get an understanding of the the extent of the large exposures to single counterparties; the impact of the level of exposure to the property subsector of development land; and the absence of basic credit procedures in ROI,” he said.
