BACKGROUND: Bankers told Gray that Anglo was experiencing 'extremely severe liquidity difficulties'
ANGLO IRISH Bank was close to collapse on September 29th, 2008. The bank’s share price was plummeting and it was haemorrhaging deposits.
As the day progressed, the bank soon realised that it would not be able to open the next day.
Before approaching AIB and Bank of Ireland to propose a rescue takeover later that day, Anglo chairman Seán FitzPatrick and chief executive David Drumm arrived on the doorstep of economic consultant Alan Gray, then a board member at the Central Bank.
The meeting – the second between Gray and FitzPatrick about Anglo – has not previously been disclosed until now.
The nature of the meeting reflects the pressure Anglo experienced that day. Gray said in a statement last night that FitzPatrick and Drumm “arrived unexpectedly” at his office in Dublin.
The bankers told him that due to the crisis in the international financial markets, Anglo was experiencing “extremely severe liquidity difficulties”.
Gray directed the bankers – as he had done in the previous impromptu meeting with FitzPatrick in early September 2008 – that the Central Bank was the appropriate channel to make such representations.
However, the bankers clearly felt that, having failed to secure a solution to the growing funding crisis at the bank from the Central Bank and the Financial
Regulator, Anglo needed someone who could make representations on its behalf that might force the Government to intervene to save the bank.
Gray in his statement said that the bankers did not ask him “to take any action or make any representations to any other parties”. The September 29th meeting lasted just five to 10 minutes, he said.
“Mr Gray did not discuss this with any other parties and at no stage, ever made any representations of any kind on behalf of Anglo Irish Bank. Mr Gray confirms he did not discuss this with the Taoiseach, or anybody else,” his statement said.
However, he did say that the Taoiseach telephoned him later that night to canvass his views on the introduction of a bank guarantee.
The Taoiseach disclosed to the Dáil on Wednesday that Gray attended the post-golf dinner at Druids Glen with him and FitzPatrick on July 28th, 2008.
Two months later, as a result of this dinner, FitzPatrick would have known that Gray had access to the Taoiseach and that Cowen valued his opinion as he canvassed his views on the economy at the dinner.
As bank after bank was rescued across Europe that day, Anglo saw the meeting with Gray as one of the last opportunities to convince the Government that a solution was needed urgently if the bank were to avoid collapse.
The bank had met the Central Bank and Financial Regulator on many occasions over the previous month and no action had yet been taken to ease the crisis.
In his presentation to Gray, Drumm said that Anglo could not access cash from the European Central Bank under existing rules as it had no home loans that it could use as collateral.
Instead, the bank wanted to use its commercial property loans as collateral to draw a loan of up to €1.5 billion from the Irish
Central Bank and a Special Liquidity Support scheme in order to protect the wider banking system.
In the end, hours after the Anglo meeting with Gray, the Government plumped for a blanket guarantee.
Gray maintains that he did not pass on any of Anglo’s views or make representations on their behalf.