Anglo Irish tape revelations spark official investigation

Anglo Irish sought a government bailout in 2008

Dublin is opening an inquiry into the bailout of Anglo Irish Bank, following release of taped phone conversations between former executives.

The recordings revealed by the Irish Independent newspaper, suggest directors may have underplayed the colossal sum needed to fix the bank.

Prime Minister Enda Kenny said on Tuesday that the public must learn the truth of Anglo Irish's collapse.

But executives at the centre of the row denied they misled regulators.

The recordings, from 2008, include conversations about how the bank went about receiving 7bn euros (£5.9bn) of bailout funds. The bank ended up needing much more.

John Bowe, head of capital markets, and Peter Fitzgerald, head of the retail bank, are heard discussing a visit to the Irish Financial Services Regulatory Authority (IFSRA).

That meeting was to negotiate the 7bn euros "bridging" loan, a figure which was described on the tape by Mr Bowe - in more colourful language - as being pulled out of thin air.

The two executives can be heard laughing at the term "bridging", suggesting they knew it would not be repaid given the bank's parlous financial state.

Mr Bowe said Patrick Neary, then head of the IFSRA, intervened at the meeting, wanting assurances that the 7bn euros would be enough to sort out the bank's problems.

But the internally-recorded tapes strongly suggest the bank asked for less than it really needed so as not to scare off the regulator.

'Deeply disturbing'

Fianna Fail, the ruling party at the time of the financial crisis in 2008, said the tapes should be referred to the police and corporate regulators.

"Any suggestion that the taxpayer was lured into bailing out Anglo Irish Bank under a false impression about the state of the bank's financial condition is deeply disturbing and has to be fully investigated by the authorities," Fianna Fail finance spokesman Michael McGrath said.

Anglo Irish was the first Irish bank to seek a government bailout.

It ran into trouble after lending tens of billions of euros to property developers before the collapse of the property market.

A government rescue package eventually cost Irish taxpayers 30bn euros ($39.4bn; £25bn) and the bank was nationalised in 2009.

The banking crisis led to Ireland having to ask the International Monetary Fund and the European Union for a 85bn euro bailout in 2010.

'Regret'

In another phone conversation with Mr Fitzgerald, Mr Bowe admits that if the bailout funding is not agreed "we're going to hit a wall in the next week" and that the bank is "already in breach" of its financial obligations.

But Mr Bowe warned that if this happened "it will become apparent that somebody somewhere has borrowed a lot more money, you know".

In another excerpt, Anglo Irish chief executive David Drumm - nicknamed "Drummer" on the tapes - can be heard laughing about "abusing" the state bank guarantee and warning his executives not to be caught.

In a statement, Mr Bowe said: "I categorically deny the allegation that I, at any time, misled the Central Bank or was aware of any strategy to do so."

He regretted the "language and tone" adopted in the telephone calls, but maintained that the discussions referred to "an envisaged emergency liquidity transaction that did not take place".

Meanwhile, Mr Fitzgerald said: "For the avoidance of doubt, I am not nor have I ever been aware of a strategy or intention on the part of Anglo Irish Bank to mislead the authorities in relation to the forecasted funding position of Anglo Irish Bank."

Both men pointed out that neither were members of Anglo Irish Bank's executive management board at the time.