The National Treasury Management Agency (NTMA) was instructed by Brian Cowen to deposit money with Irish banks in late 2007 and early 2008, it emerged at the Oireachtas Banking Inquiry on Thursday.
In response to a question from Fianna Fáil's Michael McGrath, Mr Cowen said that David Doyle, then secretary general of the Department of Finance, told him the NTMA needed a "written instruction" as its policy at the time was not to lodge money with Anglo Irish Bank.
“There was a letter of instruction, as I understand, because they [the NTMA] said they required a direction on that and they were always very mindful of their own independence,” Mr Cowen said, in the afternoon session with the committee to discuss his time as minister of finance from 2004 to 2008.
‘Specific issue’
“They had a specific issue with that bank [Anglo] and it was suggested to me that a letter of instruction would be appropriate so that people would understand that there wasn’t something happening there, that the NTMA were, in some way, not supporting an Irish bank.”
According to Mr McGrath, in December 2007 the NTMA lodged €200 million each with Bank of Ireland and AIB, €50 million with Irish Life & Permanent, and €40 million with EBS and Anglo.
“I can’t give you the figures,” Mr Cowen replied. Mr Cowen said the letter had a six-month duration and was renewed in July 2008.
In relation to the 15 per cent decline in the share price of Anglo Irish Bank on St Patrick’s Day 2008, Mr Cowen said he didn’t consider it as “something in the business model”, but thought it was related to the large position that now bankrupt businessman Seán Quinn was rumoured to have built up in the institution at the time.
Mr Cowen said he received a phone call from Seán FitzPatrick, Anglo’s chairman, around the time of the share price crash.
“The purpose of his phone call was to say to me . . . that this had happened in relation to the share price and that they believed that there was a position being taken by Mr Quinn in relation to their share and . . . that this information was out in the markets or whatever.
"And I said that these are regulatory matters, these are matters he needed to refer down to the Central Bank and to the Financial Regulator and have it dealt with there."
‘Regulatory matters’
Mr Cowen said he didn’t do anything about the issue at the time. “No, I didn’t. These, these were regulatory matters and I don’t believe there should be political interference in relation to regulatory matters,” he said.
Mr Cowen also detailed his attendance at a dinner hosted by Anglo on April 28th, 2008. He said it followed an invitation from his friend and Anglo non-executive director Fintan Drury.
“It was informal. There was no big speeches really. I didn’t go with any brief or guide or didn’t bring any papers or anything like that. It was sort of a courtesy thing that I had never met them during all the time I was minister [for finance] and they just felt it wouldn’t be right if I hadn’t . . . didn’t meet me before I left office.”
Mr Cowen said the difficulties being experienced by the bank at the time were not discussed that evening.
He also said he was not lobbied about any form of bank guarantee up to the time he stepped down as minister for finance in May 2008, in advance of becoming taoiseach.
On handing over the finance brief to the late Brian Lenihan in 2008, Mr Cowen said there had been a "watching brief" on liquidity issues for the previous eight or nine months. "We hadn't developed into crisis proportions at that stage," he said.
Mr Cowen will return next week to discuss his time as taoiseach from 2008 to February 2011.
