Banking inquiry: Ex-AIB chief’s admission on €21bn bailout

Two of the most senior players in AIB at the time of the financial crash in 2008 went before the Oireachtas banking inquiry in the second day of the nexus phase, the meat-and-drink stage of this investigation.

The morning session crackled in front of a packed gallery as barrister and former AIB chairman Dermot Gleeson gave his account of the events that led to the bank guarantee and AIB's €21 billion bailout, and reiterated his regret at how things played out.

After lunch, Donal Forde, the man who dished out €17 billion in land and development loans to Irish property developers in the boom years, offered his own mea culpa in a more hushed tones.

Gleeson said the division Forde managed accounted for only 10-13 per cent of the group’s profits but was responsible for bringing the bank down in 2008/09.

Forde agreed his division was “substantially” to blame for AIB needing a €20.8 billion bailout.

He told of how he was removed from his post as managing director of the Irish business in February 2009 to become director of strategy. It was a nothing role, and he quit in November of that year.

Forde was effectively sidelined without being fired, a typically Irish solution to a problem of what to do with someone who had served the bank for 31 years.

Much of the focus of this phase has been around the night of the infamous bank guarantee – September 29th, 2008. Some pieces of the jigsaw have fallen into place, notably via testimony from the National Asset Management Agency’s chief, Brendan McDonagh.

On Wednesday, McDonagh told how he sat in a side room in Government Buildings for four hours on the night of the guarantee without being consulted. At the time, he was director of finance with the NTMA, which managed the government’s debt.

Fateful night

Gleeson arrived at Merrion Street on that fateful night with the understanding that four banks would be guaranteed – AIB,

Bank of Ireland

, EBS and

Irish Life

& Permanent – with

Anglo Irish Bank

and Irish Nationwide being given emergency funding before being either nationalised or liquidated.

AIB and Bank of Ireland had spent the previous night cobbling together €5 billion each that could be used to temporarily prop up the laggards. Anglo was to have been “dismantled” at the weekend.

He left Government Buildings assuming this would be the solution only to discover from the media the following morning that a blanket guarantee had instead been issued.

In a bizarre exchange between Sinn Féin's Pearse Doherty and Gleeson, the Donegal TD suggested Project Omega was a plan hatched in November 2008 for AIB to acquire Anglo.

Focus elsewhere

“No . . . not for a second” was such a plan ever conceived, was Gleeson’s firm reply. AIB’s focus was on another institution, which he later revealed to be Irish Life. Anglo was banjaxed and AIB wouldn’t have had the resources for such a deal by that time, was Gleeson’s explanation.

Later, Doherty suggested the Irish Life deal was in fact Project Indigo. He again stated his view Omega related to a takeover of Anglo.

Gleeson was confused with all the project names. Chairman Ciarán Lynch eventually asked him to look into it and return to the committee with a definitive answer.

The idea that AIB was considering acquiring anyone in November 2008, given its own woes, is mind-boggling, but in keeping with the madness of the time. As Gleeson said yesterday, “Nothing would surprise me any more.”