Anglo dealer told regulator how bank was ‘trying to manipulate’ balance sheet

A financial dealer with Anglo Irish Bank told the financial regulator in October 2008 that the bank was trying to manipulate their balance sheet for their end of year accounts, the trial of four senior bankers has heard.

Four men, including Anglo's former Head of Finance, Willie McAteer (65) and John Bowe (52), who had been Anglo's head of capital markets are accused of conspiring to mislead investors by using interbank loans to make Anglo appear €7.2 billion more valuable than it was.

The interbank loans allegedly involved money being transferred by Anglo to Irish Life and Permanent (ILP) and then being put back on deposit with Anglo via ILP's life assurance division.

The transfer would allegedly appear as corporate deposits and not as an interbank loan so the bank’s corporate funding figure would appear bigger for the bank’s year-end figures on September 30th, 2008.

Peter Fitzpatrick (63), former director of finance at Irish Life and Permanent (ILP), ILP's former CEO Denis Casey (56) from Raheny, Dublin, Mr McAteer of Greenrath, Tipperary Town, Co. Tipperary and Mr Bowe, from Glasnevin Dublin have all pleaded not guilty to conspiring together and with others to mislead investors through financial transactions between March 1st and September 30th, 2008.

On day 23 of the trial at Dublin Circuit Criminal Court the jury heard recordings of telephones calls made by Ciaran McArdle, a dealer with Anglo's Group Trading department, and Claire Taylor, who was the bank's regulator at the Financial Regulator's office.

‘Not a real number’

When on October 1, 2008 Ms Taylor asked Mr McArdle about the bank’s funding figures from September Mr McArdle told her: “It’s trying to manipulate our balance sheet for our financial year end. We have boosted our customer funding number. It’s not a real number.”

He added: “I wouldn’t read too much into it. It just happens to fall on the last day of the month. It’s just something we did.”

Asked in court about this call Mr McArdle told Úna Ní Raifeartaigh SC, prosecuting, that he wished now he had chosen a different word to “manipulate”.

“Anglo were trying to manage it’s balance sheet...trying to make the balance sheet look as best as possible,” he testified.

Asked about his comment “it’s not a real number” the witness said he was trying to explain to Ms Taylor that because the funding was an inter-bank placement it would not be included in the bank’s liquidity number.

“It wasn’t a liquidity number at all,” he said and agreed the transaction did not have any impact on the bank’s liquidity.

Mr McArdle described how on September 29th and 30th Anglo made six transfers of one billion to Irish Life and Permanent (ILP) and that this was transferred back each time to Anglo.

Nice round number

Asked by Ms Ní Raifeartaigh why the figure of one billion was chosen Mr McArdle replied: “Not to be flippant, it seemed like a nice round number. Does that sound terrible?”

He clarified that it made sense, from an operational point of view, to do the transfer in tranches of €1 billion.

In another telephone conversation Mr McArdle told Paul Kane, a dealer with ILP, that "you couldn't do six yards of the funny stuff".

Mr McArdle told the jury that he felt now this was a flippant and inappropriate comment which he made at a time which was very stressful and to a professional colleague.

He said what he meant was that “we couldn’t do six billion in one go”.

The jury heard the transaction of €1 billion between the banks only took place twice on September 29th. Mr McArdle said that the billion transferred each time was “more than likely would have been the same billion”.

By the close of business that day Anglo forecast that it did not have enough in its accounts to meet its ordinary payments the next day.

Mr McArdle testified that he and Mr Bowe called the Central Bank and told them this. Later that night he learned that the bank would receive around a billion in emergency funding by the next morning.

The trial continues before Judge Martin Nolan and a jury.