THE decision by IBRC, formerly Anglo Irish
Bank, to move against former billionaire Sean Quinn in early 2011 was one of
the most controversial decisions taken by the bank led by Mike Aynsley, its
former chief executive.
It led to local
protests and an epic legal battle between the Quinn family and the bank which
stretched from Derrylin, Co Fermanagh, to Russia, the Ukraine and India.
In the end, both Sean Quinn Sr and his son Sean Quinn Jr ended up
in jail for contempt of court in relation to their overseas property empire
amid serious claims of asset-stripping.
Quinn's nephew Peter Darragh Quinn, meanwhile, absconded to the
North rather than face up to a prison spell.
The Quinn family, however, continue to fight Anglo in the courts
as they try to prove that loans from the bank are invalid. They believe that
ultimately they will be vindicated.
Last week, the Sunday Independent exchanged emails with Mike
Aynsley discussing the circumstance around the State's liquidation of Anglo. In
this second instalment of Aynsley emails, he explains the bank's reasoning for
withdrawing its support for Sean Quinn.
Aynsley also discusses the role of politicians in allowing
Ireland's banks to go crazy and what needs to be done to stop such a disaster
ever happening again.
Supporters of Fermanagh entrepreneur Sean Quinn have heavily
criticised Anglo and claim he was not treated fairly. How would you respond?
Mike Aynsley responds: "I am not really keen on talking about
the Quinn situation even though there is an enormous amount of information in
the public domain because, as you know, it is before the courts. Nonetheless, I
will say that the bank spent an enormous amount of time and effort, over many,
many months and as a result of multiple meetings with the Quinns, analysing this
very difficult and complex situation. We tried to work out a solution that did
not include enforcement.
"Since the new board and management team began our work, a
clear policy of the bank has always been to work consensually with the client
as this always produces a better economic outcome than the enforcement option.
It was no different with the Quinn situation – we were dealing with a set of
high-value, complex businesses that were in enormous difficulty due to the debt
burden that had been placed on them. The bank would have liked nothing more
than to find a solution different to that eventually pursued, but unfortunately
there was not a willingness on the Quinn side to work with the bank within
terms that the bank could accommodate.
"The 'Quinn Proposal' is something that comes up from time to
time and is referred to as a plan that would have turned the fortunes of the
group around 'if only the bank had approved it'. This proposal was looked at
every which way (and many variations) to see whether we could find a solution
other than enforcement – it included a massive amount of work by a number of
external parties and specialist advisers. The outcome of all of this, combined
with a reluctance by the Quinns to work with the bank on terms the bank could
accommodate, was that it was not possible to pursue the proposal as it was
simply not a financially viable or executable plan."
Anglo
spent a lot of its efforts during your time pursuing the children of Sean Quinn
around the world to try and get back control of overseas properties in Russia,
the Ukraine and India. What are your views on this?
"Again,
I don't want to go into any detail on this. I just find the actions taken by
[certain members of the Quinn family] to strip assets from the International
Property Group disgraceful – the flagrant disrespect and sheer contempt for the
rule of law is both breathtaking and abysmal."
Do
you think that Ireland has changed enough at the top to prevent other banking
disasters happening again?
"I
think the growing awareness by all (Ireland and elsewhere) of what led to the
banking disaster and drove the global financial crisis is critical to
preventing a repeat. But it's quite a bit more than that.
"It's
not just about awareness. It's about putting in early warning systems, oversight
mechanisms and a workable control environment that ensures there is no repeat.
The days of the Greenspan vision of 'self-regulated markets' is well and truly
over with a recognition that this approach led to a clear-transition from
self-regulation into self-interest.
"There
also has to be a willingness to confront the difficult issues and take the
difficult decisions. This is what I was referring to [on the Tonight with
Vincent Browne show] with the 21st birthday analogy where the most unpopular guy
in the room is he who stands up at the end of the night and tells people to
stop having a good time and go home!
"A
formal and independent regulatory environment and effective oversight
mechanisms will help drive the change in thought process and help to avoid the
deficiencies in supervision that existed in Ireland's regulatory framework
during the boom years and prior to the decision to rebuild it in 2009.
"But
importantly, at the political level, there has to be a willingness to 'stop the
party' when any 'bubble' inflates beyond an acceptable or safe level. History
tells us that this is a very difficult thing to do, whether in Ireland or any
other part of this planet. In many jurisdictions, they have developed a full
separation or strengthening of the wall between government and the central
bank/regulator focused on eliminating potential areas where conflicts between
related parties exist or could potentially develop.
"This
crisis, particularly in Ireland, has surely and starkly taught us all the
dangers and impacts of not taking action. Keeping this experience fresh in our
minds as the markets move through recovery and into sustained growth cycles
will be the key challenge. It's essential that Ireland, through an independent
Central Bank, continue its current focus of building effective mechanisms to
underpin a robust regulatory and supervisory framework.
"For
the authorities and regulators both inside and outside of Ireland, the
challenge will be in designing and implementing efficient and cost-effective
mechanisms, that do not retard the market's ability to move forward at a
reasonable pace. The last thing anyone needs is an overly burdensome,
bureaucratic and costly set of controls and regulations that are unworkable
outside of the theoretical world and kill incentives and innovation."
What
do you think the other Irish banks need to do?
"Looking
at the Irish banks, much progress has been made generally in cleaning up their
balance sheets but more needs to be done as quickly as is possible to support
their full recovery and position them to provide credit (lending) back into the
markets at a speed sufficient to support the pace of economic growth. The banks
must be allowed and supported in transitioning their business model back to
strong profitability, which is a prerequisite in terms of capital growth
necessary to support a growing economy.
"Generally,
though, the banks need to continue to apply resources to rebuilding image and
credibility in the minds of the public. They can only do this through good governance
and through building internal controls to ensure there is no repeat of the
behaviours of the crisis years. The banks need to work with the Central Bank
and the Government to ensure a partnership exists where good governance
co-exists with the commercial realities of running a bank and risk are managed
responsibly."
You
have had the odd issue with Nama in the past. How do you view Nama at this
point?
"Nama
also deserves to be fully supported in its efforts, although it is becoming
increasingly clear that all such bodies in the eurozone are being required to
provide much more transparency in their activities. I believe this will
continue and expect there will be calls to extend independent review and
supervision to include them. Having said this, Ireland has to move on beyond
Nama, and will – it's just a matter of when, and there may come a time not too
far away when the model may need to be modified to support a speedier
transition of its assets back to the private sector, which, of course, is where
they really belong."
What
did you and your management team achieve at IBRC?
"I
think there is a long list of achievements from nationalisation through to the
point of liquidation. I think some of the top ones, in summary, would be:
"•
Led the Bank through a period of unprecedented market turmoil whilst dealing
with multiple high-profile legacy issues, in a highly politically sensitive
environment.
"•
Built a new leadership team and drove significant changes in the broader
organisation, including overhauling the risk functions and establishing new
governance and control processes
"•
Conducted thorough due-diligence of Nama-bound and post-Nama loan portfolios to
identify the true quality of the underlying assets, established asset/loan
recovery strategies and set-up specialist work-out units to proactively resolve
distressed loans, maximise recovery and, where appropriate, restructure such
loans so as to strengthen and improve asset quality.
"•
Supported the Irish and international authorities' broader restructuring of the
bank and the Irish banking landscape.
"•
Successfully executed the acquisition of Irish Nationwide Building Society and
the downsizing of the total asset portfolios from a pre-crisis high of some
€110bn to current net loan levels of around €15bn.
"•
One of the biggest issues and most difficult challenges as we went through was
also to address the significant cultural issues in the bank. I am talking here
about things like what came out in the 'Anglo Tapes'."
What's
next for Mike Aynsley now this chapter of your life is over?
"The
last nearly four years in Ireland has been a truly unique experience.
"Professionally,
I ask myself how should I try and describe three and a half years as CEO of the
'Baddest Bank on the Planet'? Character-building probably covers a good bit of
it! It's difficult to express in a few words the learnings that come out of a
situation as complicated, diverse and unusual as the Anglo Irish Bank debacle.
But all these learnings and experiences will be extremely valuable where I plan
to focus my efforts for the next few years, which is staying in the eurozone
and helping the highly stressed banking industry to restructure and recover.
"On
the personal front, it has been a great place to live where we've made many
good friends and travelled to some truly remarkable parts of the country, so
many, but my personal favourites are the walks in and around Glendalough and a
truly amazing trip out to the top of Skellig Michael.
"It'll
be difficult to leave ... "
Sunday Independent
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