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Anglo worried that the bank guarantee could make it liable if other banks failed

A letter from David Drumm to Brian Lenihan in October 2008 has been released in full to the Sinn Féin finance spokesperson Pearse Doherty and is revealed in full for the first time.

imageThe letter from David Drumm to Brian Lenihan on 24 October 2008. Click here if you cannot see this image.

THE FORMER CHIEF executive of Anglo Irish Bank, David Drumm, expressed concern about the possibility the bank would become liable for the failure of other financial institutions in the State guarantee scheme, newly-released documents reveal.

A letter from Drumm to then-finance minister Brian Lenihan on 24 October 2008, just over three weeks after the blanket bank guarantee was announced, was sent as part of the formal process of Anglo entering the guarantee scheme.

It forms part of documents released in response to a Freedom of Information request for all correspondence related to the banking crisis between the Minister for Finance and the heads of banks that were guaranteed from the period 1 August 2008 and 11 March 2009.

The Drumm letter was partly redacted when originally released to an Irish News of the World journalist in May 2009, but has now been released in full to the Sinn Féin finance spokesperson Pearse Doherty. The Donegal TD re-requested it and the other documents, in unredacted form, last October.

It was revealed last night that some of the original copies of these documents have gone missing in the Department of Finance.

In the above letter, Drumm outlined concerns that Anglo “might become liable to the Minister for some economic consequences of the failure of another covered institution”.

He noted that the bank – which is now defunct and put into liquidation – had been assured “that will this (sic) not occur” following meetings with the Department’s legal advisers the previous day.

Guarantee Acceptance Deed

The government was forced to completely nationalise Anglo Irish Bank in early 2009, merging it with Irish Nationwide to create Irish Bank Resolution Corporation which was in turn liquidated last February as part of the scrapping of the promissory note arrangement.

Drumm’s comments form part of the cover letter for Anglo’s return of the Guarantee Acceptance Deed (GAD) documents that, once signed, deemed the bank to be part of the government’s bank guarantee scheme.

On 22 October 2008, three weeks after the infamous €64.1 billion guarantee, Brian Lenihan wrote to BOI chief Richard Burrows, AIB chairman Dermot Gleeson, Irish Life and Permanent chief Gillian Bowler, EBS chairman Mark Moran, Irish Nationwide’s Michael Walsh, Postbank chairman Thierry Schuman and Anglo Irish Bank chairman Seán Fitzpatrick with copies of the GAD for each and a cover letter explaining their signatures were required.

Once the banks signed these documents they were deemed to come under the bank guarantee scheme which had been given statutory footing under the Credit Institution Financial Support Act and subsequent regulations signed into law earlier that month.

Details of the dates at which the banks became active under the scheme were disclosed by the current Finance Minister Michael Noonan in a written answer to Doherty in November 2011.

The documents released today include letters from the Minister for Finance to the guaranteed banks and the returned documents signed by the heads of the banks as well as some, but not all, of the cover letters.

Click here to see letters from Brian Lenihan to the banks asking them to sign-up for the bank guarantee >

Read: The Department of Finance has lost letters connected to bank guarantee

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About the author:

Hugh O'Connell

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