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Oireachtas Public Accounts Committee issues documents on 2008 banking crisis; Anglo judged "resilient" without knowledge of true state of loan book
By Michael Hennigan, Founder and Editor of Finfacts
Jul 16, 2010 - 12:19:24 PM
Documents released by the Oireachtas Public Accounts Committee this morning,
show that the former financial regulator, Patrick Neary, told the Taoiseach, Brian Cowen, that Anglo Irish Bank
was in good health three days before the Government issued the
State banking guarantee at the end of September 2008. Anglo
Irish Bank was simply judged as being "resilient" without being aware of the
true state of its loan book.
the documents is a presentation by Anglo Irish Bank on September 18th, setting
out a positive summary of its development with 7,000 clients, 17,500 properties
and over 45,000 cash flows. Anglo compared various indicators with those of Bank
of Ireland, such as loan-to-deposit ratios. The builders' bank said its
loan-to-value ratio was 73 per cent.
On September 19th, days after the collapse of US investment bank Lehman
Patrick Neary had commented:"Irish banks are resilient and have good
shock absorption capacity to cope with the current situation."
US Investment bank Merrill Lynch produced a document setting out various
scenarios and in respect of Anglo, said only 3 per cent of its loans valued at
€72bn were impaired, according to the banks' management. It said Anglo needed
to raise funding of €4.9bn by Oct 24th.
Speaking points were produced for the Taoiseach on September 30, 2008, the
first day of the State guarantee.
The asset quality in the financial institutions, the document
said, was good with a strong concentration in residential
mortgages with a relatively low loan-to-value ratio. It said
there is a"very significant capacity within the institutions
to absorb and losses."
“There is therefore, a
significant buffer before there is any question of credit
impairments on the Exchequer on foot of the guarantee,” the
Neary told the Taoiseach, days before the guarantee was issued
no evidence to suggest Anglo is insolvent on a going concern basis - it is
simply unable to continue on the current basis from a liquidity point of view."
Prof. Morgan Kelly of University College Dublin and
Brendan Keenan, Group Business Editor of Independent Newspapers on Sept 30, 2008, the day
the guarantee took effect. Kelly in a stunning
de force, accurately
presents the enfeebled state of Irish banking:
The Minister for Finance Brian
Lenihan commented on Friday: “The Department of Finance
has released documents generated in the run up to the State Guarantee to assist
public understanding and critical analysis of the decisions taken by Government
It is predictable but disappointing nonetheless that the Fine Gael Leader,
Deputy Enda Kenny and Labour’s Pat Rabbitte would seek to misrepresent these
documents for their own political purposes.