Drumm quits Anglo in loans fall-out

Friday 30 January 2009 11.26
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Sean FitzPatrick - Loans transfers 'not acceptable'
Sean FitzPatrick - Loans transfers 'not acceptable'
David Drumm - Departure 'in bank's best interests'
David Drumm - Departure 'in bank's best interests'

David Drumm has resigned as chief executive of Anglo Irish Bank following last night's resignation of chairman Sean FitzPatrick.

Mr FitzPatrick resigned in a controversy over inappropriate loans to directors. His resignation relates to loans totalling €87m which he had from the bank.

A statement from the bank said Mr Drumm's resignation would take effect immediately, though he will work with the bank in a transition period until a new chief is appointed.

Anglo shares were down five cent at 27 cent in Dublin at the close today, having earlier fallen as low as 19 cent. But in late trade, the shares actually rose to 35 cent, up 9%, or 3 cent, on yesterday's close.

'It is appropriate for me to step down today given last evening's announcement in relation to the resignation of Sean FitzPatrick,' Mr Drumm said. He added that good progress was being made on recapitalising Anglo Irish and it was in the bank's best interest that a new chief executive be appointed to lead it.

Meanwhile, Mr FitzPatrick has also resigned from boards of Smurfit Kappa, Aer Lingus, food group Greencore, financial information company Experian and investment fund Gartmore.

Over eight years, Mr FitzPatrick temporarily transferred loans he had with Anglo Irish to another bank.

Read Mr FitzPatrick's resignation statement and listen to reaction to his resignation

This had the effect of keeping details out of the public domain when they would normally have been disclosed in the bank's accounts. The issue came to light following an inspection by the Financial Regulator earlier this year. The regulator said the practice was not appropriate.

In a statement, Mr FitzPatrick said what he did was not illegal, but acknowledged it was not acceptable.

The Minister for Finance Brian Lenihan welcomed the appointment of former PricewaterhouseCoopers partner Donal O'Connor as the new chairman of Anglo Irish.

He said the development would not interrupt the progress on recapitalising Anglo Irish Bank. He said the bank remained covered by the Government guarantee, so depositors and creditors were assured of the security of funds.

Meanwhile, the Institute of Chartered Accountants in Ireland's regulatory body is to look at the circumstances surrounding the director loans issue at Anglo Irish Bank. The Chartered Accountants Regulatory Board was set up to regulate ICAI members. It will look at the role played by any ICAI members.

PIBA, the country's largest group of independent brokers, said that 'it is not at all certain that the appalling practices at Anglo Irish bank were not illegal'.

Another Anglo director steps down

Anglo Irish Bank said that non-executive director Lar Bradshaw had also resigned. His decision was based on the fact that a loan, which he held jointly with Mr FitzPatrick, was temporarily transferred to another bank.

The bank says that while Mr Bradshaw was unaware that this transfer took place, he believes that it is in the bank's best interest that he should resign.

'All of the other directors have confirmed that they have not engaged in this or in any other inappropriate action in relation to their loans,' the bank said. Anglo Irish says it has decided to start a formal review of governance including policy and practice relating to the directors' loans.

New chairman Donal O'Connor also said that former finance minister Alan Dukes and former Revenue chairman Frank Daly had been appointed non-executive directors. The two are from a panel of 12 Government nominees to the banks.

Senator calls for 'cull' of bank executives

Green Party Senator Dan Boyle said there should be a cull of executives in the banking system. He said many of the people who were running our financial institutions could not be the people to work with the state.

Referring to the Mr FitzPatrick's resignation, Senator Shane Ross told the Seanad 'a complete and utter collapse of financial regulation' was happening. He said the matter raised serious questions about the Financial Regulator and that financial regulation in this country was a joke.

Senator Ross said 'the appalling vista of removing the Financial Regulator' should be debated.

Independent Senator Joe O'Toole asked how bankers could be given control over €10 billion. Labour Senator Alex White said we should pause to consider recapitalisation if it is to happen in 2009.

Fine Gael Seanad Leader Frances Fitzgerald said trust in the banks is gone. She asked if the regulator knew about the director loans when the bank guarantee scheme was put in place. Senator Fitzgerald said Fine Gael was calling for the board of Anglo Irish Bank to resign, and for the Government to take over the bank and take action to restore trust in banking.