Post-2008 Irish banking crisis
[23][24] On 15 February 2009 Fine Gael leader Enda Kenny, speaking in County Cork, asked the entire board of the Central Bank of Ireland's Financial Regulation section to resign.
[25] In late 2009, the Credit Institutions (Eligible Liabilities Guarantee) Scheme 2009 came into effect[26] Amidst the crisis, the ruling Fianna Fáil party fell to fourth place in an opinion poll conducted by The Irish Times,[27] placing behind Fine Gael, Labour and Sinn Féin, putting Labour and Sinn Féin ahead of Fianna Fáil for the first time in Irish history.
[30] In November 2011, the Credit Institutions (Eligible Liabilities Guarantee) Scheme was extended by the Fine Gael – Labour coalition government to 31 December 2012,[31] subject to European Union approval of state aid.
A mysterious "Golden Circle" of ten businessmen are being investigated over shares they purchased in Anglo Irish Bank in 2008.
Since then it has emerged that Anglo Irish falsified its accounts before it was nationalised, with circular transactions between it and another bank, Permanent TSB, being uncovered.
[39] Irish Life and Permanent confirmed it had made the deposit following the introduction of the Government Guarantee Scheme, which was set up to provide each bank under its jurisdiction with a limited supply of credit in the event of a collapse.
[39] The Financial Regulator has stated that the transactions which took place between the two banks are "unacceptable"[40] and the chief executive of Irish Life and Permanent, Denis Casey, has resigned his position.
[41] However, in a press release dated 13 February 2009, the Financial Regulator revealed that "it encouraged Irish banks to work together where necessary so as to continue to use normal inter-bank funding arrangements for liquidity purposes.
"[42] On the evening of 17 February 2009 the chairman of the building society Irish Nationwide, Dr Michael Walsh, resigned his position.
[46] The crisis began through a failure by banks, the government, news organisations and the corporate sector to heed signs that the economy was overheating.
Morgan Kelly, a professor of economics at University College Dublin, was particularly concerned about the real estate bubble which was reaching its climax in the summer of 2006.
Kelly predicted the collapse of Irish banks, which had fuelled the rapid rise of real estate by increasingly lowering their lending standards and relying more on 3-month interbank loans than on their deposit base.
[49] Kelly's prognostications caused a minor controversy but mostly went unnoticed until March 2008, when Philip Ingram, an analyst at Merrill Lynch, wrote a scathing report about the real estate bubble, focusing on the three major Irish banks most responsible for the crisis, Anglo Irish, Bank of Ireland, and AIB.
This had an inevitable effect on their capital adequacy ratios and therefore their ability to lend ever-higher amounts that were necessary to support property prices.
Ignoring the property bubble, he concluded that: ".. we are well placed to absorb the housing adjustments and external 'shocks' so that our medium-term prospects will continue to be favourable.
[54][55] On 11 February 2009, Lenihan announced the provision of two €3.5 billion bailouts to AIB and BoI as part of his government's recapitalisation scheme.
[57] Richard Bruton of the then opposition party Fine Gael, responded by calling the recapitalisation plan a "€7 billion gamble on the wrong horse".
By October 2010 Irish sovereign bond yields were above 7%, making further market borrowing unrealistic at a time when the government deficit was running at €16.7 billion.
The Irish State assigned €17.5 billion to this 'bailout', an amount that was equal to the Total Discretionary Portfolio of the National Pensions Reserve Fund.
The original bailout agreement marked a portion of the loaned money for any bank recapitalisations – again, this reflects the uncertainty over whether the PCAR stress tests in early 2011 would reveal further large funding needs.
While the promissory notes were recorded on the national debt – because they would eventually require payment, and were thus a liability – they did not involve any expenditure at the time.
The further re-capitalisations undertaken following the Prudential Capital Assessment Review stress tests in early 2011, amounting to €16.5 billion or 27% of the total bank costs, were met from a combination of Exchequer cash and National Pensions Reserve Fund cash, with the cost of the re-capitalisations defrayed by some €16 billion in haircuts on junior bondholders.
On 15 December 2013, Ireland successfully exited the bailout programme, with market bond rates at a recent historic low.
[78] In August 2014 Ireland was considering early repayment of some of the outstanding €22.5 billion in IMF programme loans which would save it several hundred million euro in surcharges.
[84] In 2015, billionaire Denis O'Brien successfully applied for an injunction against RTÉ preventing the state broadcaster from airing a report on how O'Brien was receiving, with the direct permission of former CEO of the Irish Bank Resolution Corporation (IBRC)—the former Anglo Irish Bank, a rate of approximately 1.25% when IBRC should have been charging 7.5%.
O'Brien then wrote to special liquidator Kieran Wallace to demand that these same favourable terms that were granted him by way of verbal agreement be continued.
Wallace then cooperated with IBRC and Denis O'Brien to seek an injunction in Ireland's High Court to hide this information from the public.
[90] In June 2015, the government announced the launch of a Commission of Investigation into IBRC's business dealings, to be headed by a High Court judge.
It will also cover "internal IBRC governance procedures and controls" and whether these "were fit for purpose", and will also examine the controversial sale of Siteserv to Denis O'Brien following a debt writedown of €119 million.
