Dáil Éireann Debate, Tuesday - 9 July 2013
163. Deputy Pearse Doherty asked the Minister for Finance if Anglo Irish Bank was trading solvently post September 2008 as a result of the banking guarantee; if the guarantee ensured the bank would not fail, or just insured that in the event of failure liabilities would be met; and if loan recipients following the banking guarantee can claim that their loans were issued fraudulently post 2008 because the bank was not solvent. [33116/13]
View answerIt is important to note that at no time was Anglo Irish Bank declared insolvent and the provision of capital and support by the Government has prevented insolvency. IBRC, the merged entity, comprising both Irish Nationwide Building Society and Anglo Irish Bank, remained solvent and in compliance with capital requirements up until liquidation on the 7th February 2013. Anglo Irish Bank was regarded as a systemically important credit institution and was managed and dealt with on that basis by all the Irish regulatory authorities. Failure of such an important institution would have had serious and immediate financial and economic implications. Having consulted with the Central Bank capital was provided to the bank to ensure that they continued to meet all regulatory capital requirements.
In the case of Anglo the Department knew, prior to nationalisation, that capital would be required, that funding at the bank was problematic and that certain risks, including governance issues, could, if not mitigated, materially impact on the bank. However, the bank was not adjudged insolvent at that time. The audited accounts for the period, and assessments by the Financial Regulator, PricewaterhouseCoopers (PwC) and Merrill Lynch all indicated that the bank was solvent. Anglo was nationalised because of governance issues, and funding problems in particular which would very quickly have placed the bank in a position of inability to repay maturing debt including deposits, with a major and immediate knock-on impact on other banks and on the State. Further, there was strong negative market sentiment towards the bank which was impacting on the banking sector generally.
With the benefit of hindsight, however, it is now clear that the full extent of the evolving problems in global financial crisis or the property market were not envisaged in any assessment of the bank at that time. In the course of 2009/2010 the extent of the problems became clear and the level of impairments on assets increased substantially necessitating further injections of capital to sustain the capital position of the bank.
