The loans to the former Anglo Irish Bank chairman Sean FitzPatrick exceeded €87 million over the eight years he concealed them from shareholders and the public, the Oireachtas Committee on Economic Regulatory Affairs heard this afternoon.
Former Revenue Commissioners chairman Dermot Quigley, who investigated the Financial Regulator’s handling of its investigation into the loans, told the committee there were “variations up and down from that figure” over the period in question.
Anglo said in the statement announcing Mr FitzPatrick’s resignation as chairman last month that his loans from the bank amounted to €87 million at September 30th, 2008, the end of the bank’s most recent financial year.
Mr FitzPatrick had concealed the loans by transferring them over the eight years to Irish Nationwide Building Society before Anglo’s year-end on September 30th and moving them back later.
Mr Quigley, a member of the regulator’s board, the Irish Financial Services Regulatory Authority, said Mr FitzPatrick’s loans were discovered in January 2008 during an examination of the quarterly returns for Irish Nationwide to September 30th, 2007.
However, he refused to say who within the regulator’s office noticed the loans or who else knew about them, citing confidentiality and legal advice provided to the regulator.
Mr Neary, who announced last Friday he would retire early at the end of this month over the controversy, has said he only became aware of the loans last month when it was raised by Minister for Finance Brian Lenihan.
Mr Quigley said the regulator had not discovered Mr FitzPatrick’s loans at the two institutions over the years, as staff had failed to spot the transfers relating to directors’ loans in the quarterly returns from the two lenders.
He said “a procedure breakdown” within the regulator’s office had taken place and that the regulator “could have been spotted this earlier”. He said that this was “a very serious issue”.
Mr Quigley and two other members of the authority - its chairman Jim Farrell, and John Dunne, who assisted Mr Quigley in his investigation of the regulator’s handling of the Anglo loans - said they would not resign over the issue.
“Our report shows there were shortcomings and failings but does not show that the whole authority had failed,” said Mr Dunne. Committee member, Independent TD Joe Behan, replied: “You are divorced from reality I am afraid.”
Mr Neary answered only two questions at yesterday’s hearing, as Mr Farrell fielded queries from deputies and senators on the committee.
Asked by Fianna Fáil Senator Geraldine Feeney why Anglo’s external auditors had not discovered the loans to Mr FitzPatrick, Mr Neary said he was “not familiar enough” with the procedures followed by accountants Ernst & Young.
In response to a follow-up query from Ms Feeney about whether he was surprised the auditors did not spot the loans, he said:“A lay person would expect issues of this nature and this magnitude would have been picked up.”
Mr Farrell promised to tighten the policing of the financial sector following the “unacceptable” loans at Anglo. The regulator said it would examine its own internal structures in response to the crisis.
“The behaviour of people operating at the top of our financial institutions must be fully appropriate to their responsible positions,” Mr Farrell said.
“Some of the behaviour we have witnessed of late is totally unacceptable ... We fully accept that substantial change to regulation is required here.”