Anglo believed €7.45bn loans had approval

Monday 21 June 2010 13.11
Anglo Irish Bank - Back-to-back loans under investigation
Anglo Irish Bank - Back-to-back loans under investigation

Internal Anglo Irish Bank documentation reveals executives believed that the Central Bank and Financial Regulator were 'positively disposed' to back-to-back loans worth €7.45bn provided by Irish Life and Permanent.

The reports also show that Anglo also entered reciprocal deals with Merrill Lynch, Royal Bank of Scotland, AIG and Hypo Real Estate.

Back-to-back loans of €7.45bn, dressed up as customer deposits, are under investigation by corporate enforcer Paul Appleby.

Other Anglo management emails, seen by RTÉ News, comment on the back-to-back funding in March 2008 that provided liquidity to Irish Life and Permanent.

Anglo documentation said the transaction allowed Irish Life and Permanent to 'reduce its reliance on European Central Bank repurchase funding'.

It also said the deal 'acknowledged past assistance from the counterpart [Irish Life and Permanent] and to position us for future potential arrangements'.

In a document marked 'Privileged & Confidential without prejudice in anticipation of litigation' Anglo executives said: 'It was important to reflect on the environment at the time these transactions were undertaken when the markets were the most extreme the financial markets had ever witnessed.

'There was a clear perception of implicit support from the Central Bank for Allied Irish Bank and Bank of Ireland.

'They were universally perceived as too big to fail in an Irish context. The other banks did not enjoy this same level of implicit support.'

The internal report said that the Financial Regulator and the Central Bank were concerned that Irish banks were doing little to co-operate and assist each other and 'in doing so avoid stress to the wider financial system and were encouraging greater co-operation and mutual assistance'.

The document said Anglo Irish Bank 'entered into these transactions in the belief that the Financial Regulator/Central Bank was positively disposed to the nature and type of such a transactions'.

It said discussion over the past year had 'supported this assertion'.

It added Anglo was told by Irish Life and Permanent it had held discussions with 'senior/middle management' at the Financial Regulator and Central Bank about 'being facilitated and facilitating transactions' to ensure market confidence in the shape of the balance sheets of both Irish Life & Permanent and Anglo Irish Bank.