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panic on the streets

Former AIB chief: 'I'm very sorry ... I feel deeply disappointed every day'

Eugene Sheehy said the bank took too many risks and he could have stopped this from happening.

Updated: 15.38

I’m very sorry for what happened and my role in these events. I know a lot of people were let down and feel very angry – deservedly so … I take personal responsibility for my actions and omissions.

THAT WAS THE apology given to the Irish people from former AIB chief executive Eugene Sheehy when he appeared before the Oireachtas banking inquiry today.

sheehy Eugene Sheehy

Sheehy, who was group CEO at the bank from 2005 to 2009, said he drew “no comfort from the extraneous factors” that caused the crisis and feels “deep disappointment” on a daily basis.

“There are many factors that contributed to the crisis. In my view an important factor was the degree to which decision makers became increasingly reliant on data driven, predictive risk models to guide our plans,” Sheehy stated.

I agree with a description offered by a colleague who reflecting on the crisis described our approach as a massive intellectual failure. This failure led to the triumph of models, consensus and market pressure over experience and common sense.

Sheehy said he felt the need to apologise because the bank “took too much risk in a sector that was toxic”, noting he “could have stopped it”.

He recalled what happened on the night of the bank guarantee in September 2008, noting he and his counterparts and Bank of Ireland had requested a meeting with the government.

At this meeting he said the two banks requested a four-bank guarantee, but not the blanket €440 billion guarantee that was ultimately provided.

He said he and other bankers were at government buildings for six hours on that night but were dismissed several times, noting: ”At 3.30am we were told we were no longer needed.”

Sheehy said the guarantee was needed to avoid “panic on the streets”.


Senator Susan O’Keeffe asked Sheehy why the banks had requested a meeting with the government, rather than the other way around.

He said banks wanted an urgent meeting because 29 September 2008 had been “the most tumultuous day in the history of international financial services”.

Sheehy said a four-bank guarantee would have been the “default option”, with Anglo/Irish Nationwide being wound up over the weekend.

He said he only learned that Anglo/Nationwide were included in the guarantee when a government statement was published the next morning, adding that he “could not understand” why this move had been taken.

When O’Keeffe asked Sheehy if he or other bankers had complained about this, he said they had “no choice” but to accept the government’s decision.

Sheehy said that AIB was solvent on the night of the guarantee and that he can’t remember making comments attributed to him on the night of the guarantee where he reportedly said the bank was facing bankruptcy.

buckley Michael Buckley

Sheehy’s predecessor Michael Buckley also apologised to the committee, stating:

I deeply regret what happened at the damage it caused to so many.

He said that when he retired in 2005, he had “no premonition” of what was coming and that AIB would need taxpayers’ money to stay afloat.

Sheehy admitted that the bank was in a sound position when he took over, noting that, when the crash hit, AIB was “overexposed” in terms of property lending – leading to a €21 billion bailout.

When questioned about his salary – which totalled €2.1 million in 2007 - he said “in hindsight” he was probably overpaid but noted that nobody disagreed with the salaries at the time.

Sheehy’s pension is €250,000 – of which he has returned some. Buckley didn’t reveal what his pension is.

O’Keeffe asked Sheehy if he was ever in the infamous Fianna Fáil tent at the Galway Race. He said the only time he was at the races was in 1969, when he “was a young fella”.

Outgoing CEO

AIB’s outgoing CEO David Duffy said that restructuring the bank since taking over the reins in 2011 was a “daunting task” as it was in a “significantly challenged state”.

Duffy had worked overseas for years before being asked to return to Ireland at the end of 2011 to become AIB’s chief.

He said that he and then chairman David Hodgkinson, who joined in late 2010, set about a daunting task that involved a radical restructuring of the bank and its balance sheet.

david duffy 2

Duffy said the pair had to:

  • Implement a €350 million cost-cutting programme;
  • Overhaul the bank’s funding and pricing models;
  • Create the ability to effectively deal with a challenged loan book.

He noted that AIB has returned to profit and stability, saying ht expects the bank “will be in a position to return capital to the Irish state over time subject to economic conditions and the wishes of our majority shareholder”.

Duffy said the bank took the approach that SMEs should only be protected when the business is viable.

In terms of mortgages, he said AIB wanted to keep borrowers in their homes where possible. He said sometimes they found it better for borrowers to be in “a suitable home”, which was not necessarily their own.

Duffy said mortgage write-downs made sense in certain cases, giving an example of a borrower who had bought a home for €400,000 that is now worth about €100,000 on the market. He said in an instance like this it is better to renegotiate down the borrower’s loan to something like €220,000.

In terms of Nama, Duffy said that from his own involvement with the organisation it was “extremely helpful to us in the scale of what we had to do” and “on balance, beneficial”.

Duffy will soon leave AIB to join Clydesdale Bank in Glasgow.

AIB boss: ‘I did my level best, but it wasn’t enough. I can never get away from that’

Why bankers have to swear by almighty God to tell the truth – and what happens if they don’t

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