PRESSURE MOUNTED last night on directors and senior management at Irish Life & Permanent (IL&P) to resign over the bank’s €7 billion deposit into Anglo Irish Bank last September.
A meeting of the bank’s board to discuss the unusual back-to-back transaction with Anglo Irish Bank continued late last night, having started in the afternoon. Discussions were characterised as intense.
The directors and senior executives at the State’s largest mortgage lender and life insurance company met for crisis discussions on the transaction as Minister for Finance Brian Lenihan said he expected the bank’s board to “face up to its responsibilities”.
In an interview on RTÉ, Mr Lenihan said it would not be appropriate for him to say whether he had confidence in IL&P chairwoman Gillian Bowler or the bank’s chief executive, Denis Casey. Earlier, Mr Lenihan called Ms Bowler and Mr Casey to a meeting to discuss the controversy over the temporary deposit, which helped to bolster Anglo Irish’s deposit levels on September 30th, the day its financial year ended.
The Irish Times has established that Anglo Irish’s board and audit committee were not told about the back-to-back nature of the deposit arrangement with IL&P.
It is also understood that Anglo Irish’s recently-appointed executive chairman, Donal O’Connor, a director of the bank since June 2008, was only told last month about the circular mechanism used to transfer the €7 billion temporarily from Anglo Irish to IL&P and back again to Anglo Irish.
He became aware of the nature of the transaction after requesting a report detailing any further risks facing the bank when he became chairman in December following the resignation of Seán FitzPatrick over the directors’ loans scandal.
Mr O’Connor received the report, which contained details of the arrangement, from the management at Anglo Irish last month. About the end of last September, Anglo Irish placed deposits of up to €7 billion with IL&P, which in turn placed €7 billion through a non-banking subsidiary, Irish Life Investment Managers, back with Anglo Irish.
Some €4 billion of the deposit was placed with Anglo Irish on September 30th, the day the bank guarantee was introduced.
The placing of the deposit by a non-banking IL&P subsidiary enabled Anglo Irish to categorise it as a customer deposit, which are regarded as more secure, rather than a deposit from another bank. The deposit was withdrawn within a week to 10 days. This categorisation also allowed Anglo to prop up its deposit levels and mask the levels of deposit withdrawals during September.
Green Party leader John Gormley predicted the latest revelations about the movements of deposits between Anglo Irish and ILP would lead to resignations. “There will be, and there must be, root-and-branch reform of our banking system. I believe we need a general crackdown on corporate crime in this country,” Mr Gormley told the Dáil.