This will really rub salt into the wounds.
It has emerged that Anglo, or the Irish Bank Resolution Corporation is in breach of the terms of its banking licence. It’s not a secret, IBRC stated as much in its last financial report for the first six months of 2012 but the statement on page 18 of that report seems to have gone unnoticed until now. It says
“At 30 June 2012, the Bank is not in full compliance with all Irish regulatory requirements. While the Bank ensures that the relevant Authorities are kept fullyinformed in this regard, non-compliance may result in the Group being subject to regulatory sanctions, material financial loss and/or loss of reputation”
However, it emerged yesterday that IBRC is still in breach of the terms of its banking licence. This was confirmed by Minister for Finance, Michael Noonan who was responding to a series of questions from the Sinn Fein finance spokesperson Pearse Doherty.
So let’s get this clear. We have poured €34bn into IBRC including €30bn of promissory notes on which we are scheduled to pay a further €17bn in interest between now and 2031. IBRC has closed it branches, sold most of its deposits and doesn’t take new deposits, doesn’t advance new loans and is simply running down its loan book. It’s dead.
It is supposed to keep its banking licence to continue to obtain loans from the Central Bank secured on its promissory notes. No banking licence means no Central Bank loans. And of course without Central Bank loans, IBRC would collapse tomorrow, its creditors would get paid by whatever assets remained in the bank.
You might have thought that the €663,000-a-year chief executive officer of IBRC and his €500,000-plus a year juniors might have at least have been able to ensure IBRC complied with the terms of its banking licence.
Somewhere up in Cavan this morning, and perhaps in a court room in Dublin 1, there may be eyebrows raised at a bank in breach of its banking licence terms, attempting to hold to account the probity of others. And what on earth is governor of the Central Bank of Ireland, Patrick Honohan doing about breaches that appear to be permitted for at least seven months and are still ongoing.
The full parliamentary questions and responses are shown below (there is an error in the responses and it is page 18 of the H1,2012 IBRC report – and not page 14 as stated by Min Noonan – that contains the statement referred to):
Deputy Pearse Doherty: To ask the Minister for Finance further to Parliamentary Question No. 215 of 22 January 2013, the name of the licensed institution on the banking licence used by Irish Bank Resolution Corporation, in which he is the sole shareholder of 100% of the shares..
Minister for Finance, Michael Noonan: I have been advised that Anglo Irish Bank Corporation plc is the name of the licensed institution on the banking licence used by IBRC.
Deputy Pearse Doherty: To ask the Minister for Finance further to Parliamentary Question No. 215 of 22 January 2013, if Irish Bank Resolution Corporation, in which he is the sole shareholder of 100% of the shares, can meet Central Bank of Ireland banking licence criteria as set out in the Licensing and Supervision Requirements and Standards for Credit Institutions..
Minister for Finance, Michael Noonan: IBRC currently has a banking licence and is regulated by the Central Bank of Ireland. However, I have been advised that as disclosed previously in the Bank’s published accounts, as it is an organisation in wind down, IBRC is not in full compliance with Irish regulatory requirements. Page 14 of the 2012 Interim Report clearly discloses the following under ‘Regulatory Compliance Risk’:
“Regulatory compliance risk primarily arises from a failure or inability to comply fully with the laws, regulations, standards or codes applicable specifically to regulated entities in the financial services industry. The Bank continues to operate as a regulated entity and, as such, is therefore subject to certain minimum prudential and other regulatory requirements. At 30 June 2012, the Bank is not in full compliance with all Irish regulatory requirements. While the Bank ensures that the relevant Authorities are kept fully informed in this regard, noncompliance may result in the Group being subject to regulatory sanctions, material financial loss and/or loss of reputation.”
Deputy Pearse Doherty: To ask the Minister for Finance further to Parliamentary Question No. 215 of 22 January 2013, if Irish Bank Resolution Corporation, in which he is the sole shareholder of 100% of the shares, has been assessed by the Central Bank of Ireland for authorisation requirements as detailed in the instructions paper entitled Checklist for Completing and Submitting Bank Licence Applications..
Minister for Finance, Michael Noonan: I have been advised that IBRC was subject to the relevant Central Bank of Ireland approval process at the time of the granting of its licence.
NAMA Wine Lake 
What is the nature of the breach? Being insolvent? Trading while insolvent? Loans to directors? Giving out new loans? Excessive shangri-la dinners for the ~1500 staff who still mysteriously work there?
IBRC just needs to be wound up — liquidated, like very other failed company. Creditors (the ICB/ECB) told to take a hike. We don’t have to pay the Promised-Notes if IBRC no longer exists.
@OMF, yes there are many unanswered questions and hopefully Pearse Doherty or others will pursue this.
[…] […]
if “anglo’ has no banking lic. then perhaps the further extended ELG-Dec ’13 ?-may not be applicable and…..is a ‘non bank’ covered by this-perhaps its all part of some grand plan…
“The Credit Institutions (Eligible Liabilities Guarantee) Scheme (the “Scheme”), which provides for a State guarantee of certain liabilities of designated Irish Banks, has been extended by the Credit Institutions (Eligible Liabilities Guarantee) (Amendment) Scheme 2012 (S.I. No. 519 of 2012) until 31 December 2013, subject to the necessary ongoing European Commission state aid approval. On 12 December 2012, the Minister for Finance welcomed receipt of such EU approval for the prolongation of the Scheme up to 30 June 2013; however, should continuation of the Scheme beyond that point be necessary, further EU approval will be required.”
http://www.mondaq.com/x/216554/Financial+Services/Banking+Update+Extension+Of+Irelands+Bank+Guarantee+Scheme
So, let’s get this clear: there is this apparently sensational news which seems to have gone unspotted by you for six months. The news is that a bank is not, in some *entirely unspecified* fashion, not in perfect compliance with its licence.
You might have thought that a website devoted to coverage of such matters could have been specific, or could at least have provided its readers with an educated guess as to the nature of the non-compliance.
Since it hasn’t, I will offer a speculation myself. It now follows.
Most regulatory requirements are aimed at ensuring that a bank is always able to repay depositors on proper demand by same. So, there are regulations on the size of cash, and near-cash, balances, stand-by facilities and so on.
However, a bank with no depositors may consider such regulations inconvenient, and might be inclined to disregard them without fear of actual regulatory discipline…
[…] Anglo is in breach of the terms of its banking licence […]
I am confused—–Is it AIB or the now defunct Anglo. I have long been convinced that Americans confused the two.
I’m a bit late to this one so unsure of a response. Like many reading this today, the real implications of this are somewhat unclear. Specifically, are any type of contracts, eg. mortgages, that one may have with this institution now technically invalid? Could this be used as a valid argument in court by distressed account holders? And more recently with IBRC now out of business, I am somewhat surprised to see that mortgage holders have received a letter which states they must continue making payments to IBRC!!