I thank my colleague, Deputy Michael McGrath, for his gracious courtesy in staying to hear what might be the final contribution from this side of the Oireachtas. Deputy McGrath is a chartered accountant and I, too, am a chartered accountant. Having worked in a business bank for 20 years, I have audited every type of financial institution from insurance companies to banks and so on and therefore it is because of my curiosity from a professional viewpoint that I want to examine what has been presented to us. I listened carefully to all the contributions, and will deal with them in a calm, measured and logical way because there have been inflections of emotion and headline appeal in some of the questions and the conversations that have taken place.
Mr. Brown mentioned that his bank is 176 years in business providing service but we must remember that the RBS flavour to the Ulster Bank is a very recent arrival. It is as recent as the board that was headed by the ancien
régime, and the chief executive in the form of Fred Goodwin, which had a totally different culture from the ethics of the previous 160 years. I am afraid that culture probably remains, but from an audit point of view the business of banking can be summed up by asking once a year if all the transactions in that year got properly recorded in books and systems that have a validity, that are not corrupted and that are reliable.
The audit report will say that the profit and loss account and balance sheet are in agreement with the books and records which have been properly kept. To arrive at that conclusion, even by the more modern systems of auditing, one has to test everything by internal controls, which include all systems in the bank, including internal audit controls and reports of the internal audit exercises carried out throughout the year, as well as the external auditors' reports, exercises and investigations. If there are any weaknesses, perceived or suspected, they are discussed with the management and the board, and are recorded.
From our conversations with the Central Bank and the regulator it does not appear as if there were any meaningful conversations in these areas, so that is a big deficiency. This is what I was trying to say to the Chairman to be helpful, at an earlier stage an hour and a half ago. In his presentation, Mr. Brown stated, "The exact cause of this issue will only be known once we have carried out a full investigation, which we will do as a matter of priority once the backlog has been fully cleared." If we read that sentence carefully it tells us exactly where we are, which is in the dark. Ulster Bank is still in the dark and we, as listeners, are in the dark if we read that sentence as it was expressed. That is the truth of it and everything else that has been discussed here today is, as the judges would say, obiter dicta - interesting, surrounding pieces of information.
Let us go back to the mess, however, which concerns real people and real businesses. It is equivalent to 20% of the electricity grid being out of action. When people go to branches and try to struggle through some cash transactions to tide them over for household and business requirements, it is like ESB depots giving people candles to do their domestic or commercial work. It is not on.
The Irish Payments System Organisation is the clearing house system for commercial and financial conversations between banks, so that all transactions get smoothly through the system and people can get on with their lives. We have not heard exactly what the IPSO is doing. I did not get an opportunity to ask the question yesterday because I was at the tail-end of the conversation. I suspect, however, that it is giving stand-by, open-ended liquid facilities to Ulster Bank, so that the bank can in turn have fairly open stand-by facilities for its customers.
There were also inconsistencies in this conversation. Please indulge me, Chairman. I have been patient. The inconsistencies are in the presentation and in the responses to questions. For instance, we were told that all the software is handled in Edinburgh and there is no outsourcing. If that is the case, it presents a fairly easy opportunity for the external auditors to have a thorough and comprehensive ongoing conversation with the bank's internal auditors, and with the group's internal auditors, to ensure that the stand-by systems recording in the bank were comprehensive and not corrupted, rusty or inoperable, which is the case.
Even at home on a PC, one has daily updates so that if something needs to be corrected today, one goes to yesterday's update or frozen picture to do the corrections. In the vague darkness of what has been described here, how can one fix something if one does not know the cause? One cannot do so; that is the honest answer. The question arises as to whether these software interventions have a retroactive corrupting effect on the previous compound and accumulated information on the Friday before that weekend. If somebody did some interventions with the systems, did they corrupt the stuff going back maybe a fortnight into what should have been a cut-off and inviolable information set, as of that Friday? I suspect that is what happened.
There is a lot of factual stuff that could have been addressed or answered by saying "I don't know, I'm trying to find out." If the bank still does not know, it is like treading water on a mill - getting nowhere but just going through the motions, with branch staff doing so many things. I am not trying to be unhelpful but the bank's representatives should address the questions. In my view, there should be external auditors here because they could answer questions. They ought to have the technical expertise also, because they cannot know if the books have been properly kept unless they have IT experts. They should be looking at every intervention in the year to test what happened at those intervention points, and discover who authorised them and who carried them out. How long did it take and were there any setbacks? Were there tests before they were actually completed?
We should not be shy and embarrassed about things. We are in a recession at the moment and the country is hurting. Bank customers and their families are under strain. Some families have broken apart, while other people have taken their own lives because they cannot carry the burden.
As regards the Irish Credit Bureau and clients' credit worthiness, there should not even be a question about this. It is the credit worthiness of the bank that is at issue. Look at the balance sheet mess from the previous boards and chief executives - the Fred Goodwin era, for want of a better term. The balance sheet was so wrong but where were the auditors to look at the financial structures and engineering? Mr. Brown would know about this. The loan-to-deposit ratio was out of control and the strategic decisions were all wrong. A bank needs different maturities of funding to match the maturities of the assets in which the funds are used to invest. I just do not buy all these buzz words.
The residual, cultural attitudes from the Goodwin era still prevail. We are all stepping up to the challenge of facing into this recession. There is huge pain. I will read out an e-mail sent to me on Tuesday by an Ulster Bank customer:
Dear Mr. Mathews,
I am a constituent in Dublin South, living in Ballinteer. I am writing to you to express my deep concern with the situation at Ulster Bank and my deep disappointment with the political response from the Government and lack of action by the Central Bank and the Financial Regulator. Our company has significant funds in an Ulster Bank account, which we cannot access, and they will not answer their phones to talk to customers. [This is the experience. I am not making this up. I do not know this person.] Or they won't give you your money if you go into the branch. If the bank is actually bust, and I suspect that this may well be the case, we'll be out of business with the loss of seven jobs - it is a small business in the media sector - and now those who need money for day-to-day living expenses are having to borrow from family and friends to pay for food for their families. This is a national disgrace and I implore you to speak out on behalf of the ordinary people of Ireland. Whilst you may be an ex-banker, I believe that you are an honest man, so please do the right thing by us.
Yours sincerely...
I do not know that person but that is typical. The committee heard Deputy Michael Creed read out his letter and this is happening all over the place. It is unbelievable that the stand-by systems have failed in the way they have. It is equally unbelievable that the cause is not known; the witnesses said so themselves. Whatever it takes, the bank should get its people to explain to their customers what is going on. Who are Ulster Bank's external auditors?
