Europe

Irish banking crisis inquiry: Ex-AIB boss admits 'eternal shame' over failures

Eugene Sheehy Image copyright RTÉ
Image caption Eugene Sheehy told the Irish Banking Inquiry that as chief executive of AIB, he "could have stopped" the bank taking too much risk with property development loans

The former boss of Allied Irish Banks (AIB) has said he feels "eternal shame" for failing in his responsibilities before the bank had to be bailed out.

Eugene Sheehy admitted AIB "took too much risk" on property developers ahead of the Irish banking crisis in 2008.

He was giving evidence to a Dublin inquiry into the causes of the crisis.

Mr Sheehy added he did not understand at the time why Anglo Irish Bank and Irish Nationwide were included in the government's bank deposit guarantee.

He was referring to the controversial blanket guarantee the government gave in September 2008, that it would protect all deposits in Irish banks in the midst of a deepening international financial crisis.

'Disaster'

The aim was to reassure investors and prevent a "run" on Irish financial institutions, but ultimately resulted in the Irish government having to seek an international bail-out from the European Union and the International Monetary Fund (IMF) in 2010.

The two smaller lenders - Anglo Irish Bank and Irish Nationwide - eventually absorbed more than half of the 64bn euros (46bn) that the Irish government pumped into the banks.

Mr Sheehy also told the inquiry that he cannot remember telling government officials that AIB was facing bankruptcy and disaster on the night that the banking guarantee deal was agreed.

The comments were attributed to him in a internal Department of Finance memo.

Mr Sheehy spent 38 years working at AIB, and was in charge of the bank from 2005 to his retirement in 2009.

'Personal regret'

Badly exposed to the bursting of the Republic of Ireland's property price bubble, AIB was forced to seek billions of euros of government money to stay in business.

Mr Sheehy told the Irish Banking Inquiry: "I would like to express my deep personal regret for my role in what occurred. I am keenly aware of the damage caused and this fact occupies my thoughts on a daily basis."

The Republic of Ireland's international bail-out programme led to years of austerity, with significant public spending cuts and new taxes on property and domestic water supplies.

Referring to AIB's failed property development loans, Mr Sheehy added: "We took too much risk in a sector that turned out to be toxic. I was CEO, I could have stopped it.

"That I failed in that responsibility is a matter of eternal shame."

Northern Rock

Mr Sheehy confirmed that AIB was asked to provide 5bn euros (3.6bn) towards the rescue of Anglo Irish Bank, as part of the government guarantee deal.

He said he believed that a default by Anglo would badly affect the reputations of all Irish banks, risking a run on their UK deposits.

Given the public's reaction to Northern Rock in the UK, Mr Sheehy said was likely that domestic customers would panic and Irish branches would not be able to cope.

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