By Dara Doyle
Anglo Irish Bank Corp.’s decline last year cost the jobs of its chairman, chief executive officer and Ireland’s financial regulator. Today, it spelled the end for two top executives at rival Irish Life & Permanent Plc.
Finance Director Peter Fitzpatrick and treasury head David Gantly resigned from Irish Life, in a controversy over transfers of funds between the two lenders, the Dublin-based company said in a statement today. The board rejected the resignation of Chief Executive Officer Denis Casey.
“Another day, another scandal,” said Brian Lucey, associate professor in finance at Trinity College Dublin. “I guess international investors are getting used to hearing the unbelievable out of Ireland.”
The integrity of the country’s financial industry may be at stake. The scandal is hampering efforts by Ireland to shore up confidence in its ailing banking system. The government agreed this week to inject 7 billion euros ($9 billion) into its two biggest banks, though analysts say they may need more.
These issues “affect investors willingness to put their money into a jurisdiction where telling the truth seems to be not a high priority among some companies,” said Niamh Brennan, a professor of management at University College Dublin. “It begs the question, is this widespread?”
On Sept. 30, the last day of Anglo Irish’s fiscal year, Irish Life deposited 4 billion euros overnight with Anglo, the company said.
That transfer was made after Anglo deposited the same amount “as collateral” with Irish Life, the company said. Similar transactions amounting to 3.45 billion euros took place earlier in the month.
‘Enron-style Accounting’
“It may well have created a false impression about the deposit base,” Finance Minister Brian Lenihan told national radio yesterday. “Clearly the transaction wasn’t desirable because it involved the use of the bank’s own money going out of the bank and back into the bank in a different guise.”
“Unacceptable” practices at Anglo emerged before it was nationalized last month, Lenihan said. Joan Burton, finance spokeswoman for the opposition Labour Party, called the transfers “Enron-style accounting.”
The transactions were “properly accounted for and fully disclosed to the financial regulator,” Irish Life said.
The company also said that while the financial regulator had indicated that lenders should “support each other,” the board expressed “strong disapproval” of the measures used to help Anglo.
‘Mistakes Were Made’
“I have absolutely no doubt about the integrity of the individuals concerned,” Chairman Gillian Bowler said in the statement. “However in providing support to the broader financial infrastructure, mistakes were made - for which I and the board apologize unreservedly.”
Anglo Irish declined to comment.
The financial regulator is now reviewing the “circumstances” of the transactions, said Lenihan, who held a meeting with Irish Life yesterday.
Anglo Irish started unraveling in December, when former Chairman Sean Fitzpatrick resigned, saying he hadn’t fully disclosed loans of more than 80 million euros from the bank. Chief Executive Officer David Drumm left a day later, and Financial Regulator Pat Neary stepped down a month later after it emerged his agency had known about the loans.
The government moved to seize control of Anglo Irish after Fitzpatrick, 60, said in a Dec. 18 statement he had temporarily transferred borrowings to another bank before each year-end, moving them off Anglo’s books.
‘Unethical Practices’
“This is the real damage that’s been done, the reputational damage to the country’s financial system by the unethical practices that have come to light,” Lenihan said.
Ireland’s five-member ISEF financial index plunged 94 percent over the past year, compared with a 65 percent drop in the Bloomberg Europe Banks and Financial Services Index.
Eugene Sheehy, CEO at Allied Irish Banks Plc, the largest bank, said the case of Anglo Irish was “disappointing and caused problems” for Ireland’s reputation.
“But you can’t tar everybody with the same brush,” Sheehy said in an interview yesterday by telephone. “There are institutions in Ireland operating to the highest standards.”
The government on Feb. 11 announced plans to inject 3.5 billion euros each into Allied Irish and Bank of Ireland Plc, seeking to cushion the impact of surging bad debts.
Earlier, the government had planned to inject 2 billion euros and underwrite a further 1 billion euros of shares for each bank. It scrapped that plan as banks couldn’t find willing investors as the economy lurched deeper into crisis.
Now the latest revelations have overshadowed efforts to restore the banking system, said Joan Burton, the Labour lawmaker, in a Feb. 10 statement. “Ireland’s international reputation continues to be severely undermined.”
source : Bloomberg
