The banking crisis escalated this week with the decision of the Government to nationalise Anglo Irish Bank, less than four weeks after unveiling a €1.5bn recapitalisation plan for Ireland's third-largest bank. The bank moved into state ownership with the passing of legislation by the Dáil and Seanad on Tuesday night.
Minister for Finance Brian Lenihan said the Government’s move to nationalise Anglo Irish Bank had been undertaken to safeguard the economic future of the country and the continued viability of its financial institutions. Mr Lenihan said he had been advised that letting the bank fall would lead to “a very serious disruption of our financial system.”
The bank’s demise had been fuelled by its exposure to property lending, global sentiment towards the sector and a collapse in confidence following revelations of controversial secret loans to directors. Since reaching a peak of more than €17 in mid-2007, shares in Anglo Irish had plummeted, and closed at just 22 cent in Dublin last Thursday before trading was suspended.
Five directors resigned from the bank’s board on Monday, marking the departure of all the non-executive directors other than chairman Donal O'Connor, who only joined the board last summer, and those appointed under the bank guarantee scheme – Frank Daly and Alan Dukes. The Minister for Finance said all three would be retained, while the former chief executive of the Bank of Ireland, Maurice Keane, is to become a non-executive director. Further appointments will be made in the near future.
Mr Lenihan said the final value of Anglo Irish Bank will be decided by a State-appointed assessor and its share price would not be the final guide to its valuation. He warned, however, that Anglo may finally be judged to be worthless by the assessor, in which case shareholders would receive nothing.
An egm had been called last Friday but in the event it was meaningless. Chairman Dónal O'Connor did go ahead, however, and apologised to assembled shareholders for the actions of his predecessor Seán FitzPatrick. He revealed that Mr Fitzpatrick had a "revolving facility" with the bank and that prior to the end of year in 2007 he had a loan of €129m. At year end the books showed just €7m as €122m had been offloaded to the Irish Nationwide Building Society, only to reappear when the auditors had finished their review of the accounts.
At the end of fiscal year 2008, that was on September 30 last, Mr FitzPatrick's borrowings from the bank stood at €84m. Mr O'Connor also reported that other directors had loans totalling €95m as of September 30.
Opposition parties have claimed the Government's banking policy is in ruins. Labour spokeswoman Joan Burton called on the Government to seek a High Court order under the Companies Act for the appointment of one or more inspectors to investigate the affairs of Anglo Irish Bank. http://www.angloirishbank.ie/