Taxpayers need to know more about what is on Anglo books

A year ago, the scandal-ridden Anglo Irish Bank was nationalised. Twelve months on, some aspects of the Anglo disaster are better known than others. The bank's helter-skelter growth over the previous 10 years was based on the crazy assumption that commercial land prices would continue to soar. It therefore continued to make reckless lending to property projects, including helping build huge swathes of office blocks, residential estates and hotels. In recent years, the bank became most linked with the redevelopment of the Dublin docklands. Some of its most senior directors were allowed controversially to join the state body responsible for the docklands redevelopment. The bank's hubris knew no bounds. As its shares soared, Anglo made many of its employees millionaires. Even as late as 2007, astute international analysts listened incredulously as Anglo stated its ambition to become one of the largest specialist commercial property lenders in Europe. Through high-risk but simple stock market bets, called contracts for difference (CFDs), the bank's shares became the most speculated of any lender in the work. Hidden from public scrutiny because regulators and the investment community here decided to keep it a secret, a quarter of the bank's share register was held indirectly through the stock market bets. By failing to prevent speculation in the bank's shares, the Irish Financial Regulator arguably failed to follow the rulebook set down by its own regulator, the Bank for International Settlements. Anglo was still worth over €3bn 18 months ago, even as former senior bank directors secretly assembled a group of 10 businessmen to buy Anglo shares. In the summer of 2008, the unwinding of the losing contracts for difference bets created a huge number of new shares that threatened to lead to a collapse of the Anglo share price. It would have been to the benefit of the Irish taxpayer to know at this stage many of the aspects of the Anglo story. Instead, taxpayers learned later about the hidden huge loans the bank advanced to its own chairman, Seán FitzPatrick. It was revealed that the bank's auditor failed to detect FitzPatrick's annual borrowings from Irish Nationwide. Anglo's public reports and accounts therefore failed to inform shareholders of the many millions of euro borrowed by FitzPatrick. It then emerged that Anglo - under circumstances that have yet to be fully explained - took a temporary deposit of €7bn from Irish Life & Permanent in September 2008. FitzPatrick and others resigned 13 months ago. The taxpayer picked up the pieces, leaving a generation exposed to paying back tens of billions of euro in bond debt loaned by the bank by overseas investors. The Government appointed its public representative to the bank and made other high-level changes. The Anglo disaster was created because regulators failed to insist that shareholders in public accounts were told about the risks the bank was facing. Arguably, taxpayers, as the new owners, know even less. Anglo last year received €4bn in cash from the taxpayer, more than the €3.5bn the two main banks, AIB and Bank of Ireland, have each so far got from the public. Many senior independent economists predict that Anglo will swallow the bigger part of up to €12bn in additional investments the taxpayer will be required, over the coming months, to inject into the Irish banks to complete the recapitalisation process. Worse, most experts believe that the taxpayer will get nothing back from its investments in Anglo and Irish Nationwide. The taxpayer has a better chance of getting the capitalisation money back it will have to put into AIB and Bank of Ireland, experts say. Remarkably, the taxpayer has since been starved of information about Anglo, the lender it reluctantly owns. Last May, the bank published its 12-month earnings report for the period up to the end of March. Since then, taxpayers have not been told about how much more of its cash the lender will swallow. Last May, Anglo's new chairman, Donal O'Connor, struck the appropriate tone. "Clearly, the bank made mistakes in some of the lending decisions taken in recent years, particularly in relation to property development in Ireland. Our rate of growth and risk appetite at the top of the economic cycle was imprudent and the stark evidence of this is seen in the figures announced today." The bank went on to "welcome" the Government's injection of €4bn of taxpayers' cash. Anglo added: "The bank is very conscious of its responsibility to the taxpayer. The minister's decisions place the bank on a sound financial footing and we are determined to repay the taxpayer by creating a viable, efficient and respected bank." At the time, Anglo disclosed it had made a loss of €4.1bn, after writing off a similar amount to account for loans that it had given up any chance of getting back. Unfortunately, other so-called impaired loans accounted for €10.7bn, or about one-sixth of its €70bn loan book. The bank bluntly said in May: "Since September (2008), land values, particularly in Ireland, have fallen by up to 40 per cent, bringing the total estimated fall in values to between 50 per cent and 70 per cent from peak levels, and this has been taken into account in assessing the impairment charge for the period. In addition, 'real economy' issues and reduced occupier demand have had a negative impact on business cashflows, rents and commercial property yields in all core markets." Given the stakes, it is remarkable that, eight months later, taxpayers have no more recent information to assess their bet on Anglo.