WHO KNEW what and when? The mystery deepens in relation to Anglo Irish Bank and how and why it came to be nationalised. Each week brings some fresh revelation about this deeply dysfunctional bank’s operations last year, when it sought to conceal its financial difficulties from the public and from investors.
On Tuesday, Taoiseach Brian Cowen revealed that last March, as minister for finance, he was told of difficulties arising from Mr Sean Quinn’s potential 25 per cent stake in Anglo, which he held via contracts for difference (CFD). These difficulties, he was then assured, had been resolved. CFDs are financial instruments that can be used to facilitate stake-building in a company by stealth and in secret, as the buyer is not required to make a public disclosure of ownership. Mr Quinn converted a majority (15 per cent) of his CFD stake into Anglo shares, and the rest (10 per cent) was bought by a group of 10 wealthy investors, in an effort to bolster falling Anglo’s share price. However, as we now know, this €300 million investment in Anglo shares was, in fact, financed by the bank itself, via loans to investors who in turn offered €75 million as security for their borrowings.
Nationalisation of the bank has meant the shares have no value and there are suggestions now that Anglo has now written off these loans. There are further suggestions that the bank will not pursue the investors for recovery of the €75 million owed. Is the taxpayer to pick up the debts of 10 wealthy individuals?
Mr Cowen has said he did not know then, nor does he know now, the members of this so-called golden circle of 10 shareholders. He has also said that his successor as Minister for Finance, Brian Lenihan, was first advised last July of their investment in the bank. And neither, it seems, was Mr Lenihan told who the investors were. The Minister only discovered later how the €300 million share investment had been financed, following due diligence carried out on his behalf.
Mr Cowen has dismissed as nonsense any suggestion the Government had nationalised a bank to protect some people. These are matters for the Financial Regulator, and for the Office of the Director of Corporate Enforcement, to investigate and decide. And the quicker the issues are resolved the better.
It is important to restore domestic and international confidence in Irish banks. Equally, the preoccupation with the banks should not be allowed to obscure the bigger picture – an economy in deepening crisis. Yesterday, the European Commission began an excessive deficit procedure against Ireland, citing the State’s massive government borrowing. This year, the projected budget deficit (11 per cent of GDP without spending cuts) is the highest in the EU, and represents a major breach of the Stability and Growth Pact. The commission doubts that the Government’s recently revised recovery strategy, which proposes to bring the budget into broad balance by 2013, can be achieved. Never before was there such an urgent requirement for clarity all around.