The British government knew before the Irish cabinet that the state would not allow Anglo Irish Bank to fail and was prepared to pump billions into it to keep it afloat.
On the day of Ireland’s blanket guarantee on September 29, 2008, according to newly released files from the British Treasury, Ireland’s financial regulator reassured the UK that “the Central Bank / Government would support” Anglo.
The documents reveal that the Financial Regulator tipped off Britain that Anglo might be “unable to roll €3 billion [in funding] overnight,” but not to worry as if that happened the Central Bank or the government would step in to bail it out.
An internal email entitled “Iceland and Ireland,” dated September 29 2008 states that Britain’s Financial Service Authority was “most concerned about Anglo Irish.”
“The FSA talked to the Irish regulator today who also share concern on the heavy reliance the bank [Anglo] has on corporate deposits,” the released under Britain’s Freedom of Information Act email states.
“The Irish regulator is in close contact with the firm. If the liquidity conditions worsened for them, and if they were unable to roll €3 billion overnight, then they would have to access liquidity from the Central Bank or government,” the documents state.
Ireland’s Financial Regulator insisted to Britain that Anglo is “not seen as standing out from the others [AIB, Bank of Ireland etc].”
The Central Bank’s fears about Anglo do not seem to have reached Minister for Finance Brian Lenihan until much later in the day on September 29. According to the guest sign-in book of the Department of Finance, at 3pm Minister Lenihan met with the Irish Creamery Milk Suppliers Association before a 4pm meeting with various charities, including Protestant Aid and the Children’s Rights Alliance. Meetings then took place with the Irish Congress of Trade Unions for a few hours.
It was only at 5pm that Padraig O’Riordan of Arthur Cox, a key advisor to the state in the financial crisis, showed up. His arrival was followed by a series of frantic meetings which culminated early the following morning with the government holding a rushed cabinet meeting where Ministers were woken from the beds to agree to a blanket guarantee of the banks.
By October 21, 2008, just three weeks after the bank guarantee, the British Treasury had seen through Ireland’s bluff when it blanket guaranteed the entire liabilities of its banks.
In a note entitled “Global economic situation,” Britain’s powerful financial ministry concluded that “On the retail side Bank of Ireland and Allied Irish [Banks] are also significant, as people start to question whether the Irish can afford the guarantee they have put in place.”
Anglo Irish Bank was “finding it difficult” to convince anyone in the market to leave funds on deposit with the bank for longer than two weeks – such was the fear it would collapse, the British government noted.
Nonetheless, they concluded said Anglo’s “credit quality is ok.”
Just what Britain knew about Ireland’s financial crisis is largely censored however, even five years after the blanket guarantee which bankrupted the country.
The Information Rights Unit of Her Majesty's Treasury refused to release to the Sunday Independent numerous documents which took it four months to compile.
“We believe that disclosure would inhibit the frankness and candor of policy discussions,” Wendy Randall of HM Treasury’s Information Rights Unit said. “It would not be in the public interest to inhibit Ministers’ ability to take views and discuss issues relating to ongoing policy options,” she continued.
Therefore, details on those British documents regarding Ireland's economic collapse being withheld could not be revealed, she explained.
Food & Drink
An Irish recipe repertoire essential - simple delicious colcannon