22 men and €26 Billion

22 men and €26 Billion
The named

The secret report that convinced Cowen the banks weren’t bust

The Sunday Business Post can today reveal the secret PwC report into Ireland’s banks that shows how just 22 men ended up owing €25.5 billion to their banks.

The report also shows how PwC said that in its worst case scenario, Ireland’s banks would lose only €10.6 billion. However, this was clearly qualified.

The €10.6 billion figure was twice what Ireland’s banks told the state at that time, but still out by more than €50 billion from the €64 billion required by the taxpayer to bail out the banks.

After receiving the report in November 2008, taoiseach Brian Cowen claimed in the Dáil that he was right to guarantee Ireland’s toxic banks as they had more than enough cash to survive the next three years.

He said: “The PwC report demonstrates, under a number of stress scenarios, capital levels in the covered institutions (the six Irish banks guaranteed by the taxpayer) will remain above regulatory levels in the period to 2011.”

Reading the report, however – and the many caveats included by PwC, such as the assumption that the banks were telling it the truth – it is hard to understand how Cowen was so definitive.

Ireland’s developers were creaking under the strain in November 2008 and even the banks acknowledge that some of them, such as Fota Island boss John Fleming (later a bankrupt) were already close to collapse.

PwC identifies that Irish banks have a €63 billion land and development land exposure alone and that many of the country’s biggest developers were already struggling or failing to pay their interest bills on their massive land banks.

The top 22 developers alone in the country had an €8.8 billion exposure to development land. PwC also shows that Irish banks had no idea of the scale of losses facing them.

For example, AIB told PwC that its biggest single impaired loan at the time was of just €31 million to a chicken farmer in Poland accused of fraud.

Bank of Ireland, meanwhile, insisted that developers such as Sean Dunne were good for their loans when the bank ended up losing €120 million on the so-called Baron of Ballsbridge alone.

Anglo thought its worst loan at the time owed by a minor developer might cost it €16 million.

PWC also shows that Ireland’s developer kings were massively overstretched and failing in many cases to pay their company interest bills.

Bernard McNamara, for example, was facing “serious cash-flow difficulties” and was “discussing” in the thick of the crisis raising €2.5 million more secured on his home on Ailesbury Road.

Developer Liam Carroll meanwhile needed €120 million just to survive the next 12 months while financier Derek Quinlan was being put under their loans when the bank ended up losing €120 million on the so-called Baron of Ballsbridge alone.

Anglo thought its worst loan at the time owed by a minor developer might cost it €16 million.

PwC also shows that Ireland’s developer kings were massively overstretched and failing in many cases to pay their company interest bills.

Bernard McNamara, for example, was facing “serious cashflow difficulties” and was “discussing” in the thick of the crisis raising €2.5 million more secured on his home on Ailesbury Road.

Developer Liam Carroll, meanwhile, needed €120 million just to survive the next 12 months, while financier Derek Quinlan was being put under pressure to sell his art collection.

PwC also identified serious structural issues in Irish banks.

It said AIB had breached Financial Regulator limits on sector concentrations by lending too much for builders to buy development land and it notes that 78.2 per cent of Anglo’s loan book was out to property companies.

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