Officials from the Central Bank have been defending the fact that they did not pursue Guinness and Mahon further when they discovered the beginnings of the Ansbacher scheme in the mid-1970's. The then Deputy General, Mr Timothy O'Grady-Walsh, said they did not want to cause a run on the bank and the protection of depositors' money was their main concern. He said everything else was "subordinate."
A senior Central Bank official told the tribunal that if they had gone after Des Traynor, depositors would have lost money. In evidence, Mr Adrian Byrne, now banking supervisor with the Central Bank, said that the Bank was faced with two options after an on-site inspection of Guinness and Mahon revealed a loan scheme designed to evade tax. It could have revoked the bank's licence, or it could have demanded the resignation of certain directors. He said that either course of action would most likely have led to the bank's collapse and depositors would have lost money.
Mr Byrne went on to say that the Central Bank's priority was to safeguard depositor's funds and to avoid the bank's collapse. He explained that another bank, Irish Trust, had collapsed in 1976 and the Central Bank did not want that to happen again. Senior Counsel for the Tribunal suggested to Mr Byrne that the Central Bank could have pressed Mr Traynor further for access to Guinness and Mahon documents. Mr Byrne accepted this but said that at the time the bank trusted Mr Traynor and believed his assurances that he would wind down certain schemes that were causing concern.
The former Deputy General of the Central Bank told the Moriarty Tribunal that it was their duty at all times to avoid a run on a bank. Mr Timothy O'Grady-Walsh was being asked why the Bank did not take more action when they learned about Guinness and Mahon's back-to-back loan system and tax evasion. He said the focus of their concern was the protection of depositors' funds. Mr O'Grady Walsh went on to give his personal view of Des Traynor, whom he described as "a very clever and very skilful man." He said Mr Traynor would exploit the limits of the law to the utmost, but he had the "feeling" that he would not go outside the law. In relation to the Cayman-backed loan secured by one of the Central Bank's directors, he said, even though this was raised in their inspection report of Guinness and Mahon, it was not their function to comment on an individual case, nor had they any authority to enquire into the affairs of an individual.
Mr Adrian Byrne spoke of the high esteem in which Des Traynor was held in banking and accountancy circles. "We thought he would work his way out of this," he said. He said, while they did not think much of him as a banker, they had no firm evidence as to what was going on in Guinness and Mahon. Asked to compare their lack of action with Mr Traynor with their decision to collapse Irish Trust Bank in the same year, Mr Byrne said "it was a judgement call at the time, that's all I can say about it." He added, "the fact is the bank didn't collapse and depositors didn't loose money, that was our prime objective."
It also emerged that Ken O'Reilly-Hyland's loan with Guinness and Mahon was uncovered during the 1978 inspection of the bank. Mr O'Reilly-Hyland was at this time a director of the Central Bank. His loan stood at over £400,000 and was backed by a deposit in the Cayman Islands of over £200,000. Mr Byrne was asked if he brought this matter to the attention of anyone else, he said it went into his report and it was "passed along the line" to the Deputy General of the Bank. He agreed that it was an issue that needed to be addressed, but said his job was simply to report the fact.
