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FitzPatrick Anglo loans were more than €87m (Irish Times)

04 November 2011

THE SECRET loans to former Anglo Irish Bank chairman Seán FitzPatrick exceeded €87 million at times over the eight years he concealed them, the Oireachtas Committee on Economic Regulatory Affairs was told yesterday.

Former Revenue Commissioners chairman Dermot Quigley, who investigated the Financial Regulator’s handling of the inquiry into the loans, told the committee that there were “variations up and down from that figure” over the eight-year period.

He said he could not disclose the size of the loans to Mr FitzPatrick each year, saying that legal advice constrained him.

Anglo said last month Mr FitzPatrick’s loans totalled €87 million at September 30th, 2008, the end of its most recent financial year.

Mr Quigley, a member of the regulator’s board, the Irish Financial Services Regulatory Authority, said the loans were discovered in January 2008 through an examination of a quarterly report from Irish Nationwide Building Society for the three months to September 30th, 2007.

Mr FitzPatrick concealed the loans by transferring them to Irish Nationwide before Anglo’s year-end on September 30th and moving them back afterwards.

His borrowings were listed among Irish Nationwide’s top 30 loans, Mr Quigley said. He said that legal advice prevented him from saying who within the regulator’s office first spotted the loans or who else knew about them.

The regulator’s authority (board) and chief executive, Patrick Neary, said they became aware of the loans after they were raised last month by Minister for Finance Brian Lenihan. Mr Neary said last Friday that he would retire on January 31st over the regulator’s handling of the loans. The regulator was sharply criticised by the committee yesterday.

Chairman of the regulatory authority, Jim Farrell, who fielded questions from TDs and Senators, promised to tighten the supervision of banks in future, following the “unacceptable” loans at Anglo.

“Some of the behaviour we have witnessed of late is totally unacceptable,” said Mr Farrell. “We fully accept that substantial change to regulation is required.”

Mr Quigley said the regulator had failed to investigate the loans as it had been, in part, busy coping with the worsening financial crisis.

“This went off the radar screen. . . We had a serious breakdown in our process and internal communications,” he said.

Fianna Fáil Senator Geraldine Feeney said it was “pathetic” for the regulator to say it had been too busy to investigate the loans. “You were blindfolded, you were sitting on your hands, you had your mouth gagged and you had your ears covered,” she said.

Mr Quigley said he “could not reconcile” the evidence presented to him during his three-week investigation into the affair. Fine Gael TD Leo Varadkar said: “Somebody there is not telling the truth.”

Mr Quigley, Mr Farrell and another member of the authority, John Dunne, who assisted Mr Quigley and attended yesterday’s committee hearing, said they would not resign over the controversy.

“Our report shows there were shortcomings and failings but does not show that the whole authority had failed,” said Mr Dunne. Independent TD Joe Behan replied: “You are divorced from reality.”

Mr Neary answered only two questions yesterday. Asked why Anglo’s external auditors had not seen the loans, he said he was “not familiar enough” with their procedures. “A lay person would expect that issues of this nature and this magnitude would have been picked up.”

The regulator was criticised for allowing excessive lending to developers and the property market.

Mr Farrell said there had clearly been “a concentration of risk in certain areas beyond what is prudent, to put it mildly”.

The regulator said its investigation into directors’ loans at the other institutions would be completed by the end of the month and that the Director of Corporate Enforcement had sought further information on the Anglo loans.