IL&P TRANSACTIONS:PRICEWATERHOUSECOOPERS (PWC) said in its report on Anglo that there was "no legal right of set off" in relation to some of the bank's circular transactions with Irish Life & Permanent (IL&P). However it does not appear to support definitively either bank's characterisation of the deals, which last week led to the resignation of IL&P chief executive Denis Casey and two of his top lieutenants.

These transactions prompted political pressure on Minister for Finance Brian Lenihan last week after it emerged that information on the lodgements was in a PwC report sent to his Department last October, although he learned of the issue only last month. Officials in his Department referred the matter to the Regulator but did not inform him about it.

Mr Lenihan said the matter was not identified as a risk factor by PwC. In its report PwC said Anglo’s money market asset balance “due from banks” at the end of September included an amount of €7.2 billion place with ILP.

“This amount is balanced (though we believe there is no legal right of set-off) by an arrangement, whereby a non-bank subsidiary of ILP placed a customer deposit with the bank for roughly a similar amount,” the report said.

“The effect is to gross up the bank’s balance sheet, boosting customer deposit liabilities and interbank assets. The arrangement reduced by approximately €6 billion within three days of the year-end.”

PwC said the page published last night did not appear in summary findings sent to Mr Lenihan by the Regulator and the Central or in presentations made to the Minister, which were made to summarise credit, impairment risk and capital stress scenarios for each of the six covered lenders.

Anglo has engaged solicitors McCann FitzGerald to review the controversial lodgements. They are examining the extent of Anglo’s consultation with the relevant external authorities.

Separately, the Financial Regulator is investigating whether Anglo undertook the transactions in an effort to artificially prop up its deposit levels and give a false picture of financial strength at its financial year-end last September.

The regulator has already said in public that the transactions were “completely unacceptable”. IL&P’s final deposit for €4 billion was made with the benefit of the State guarantee introduced at the end of September. Anglo is in public dispute I&P over the nature of the lodgements.

ILP has said the transactions were, in effect, loans from IL&P backed by “collateral” deposits from Anglo. However, Anglo believes the “interbank placements” with ILP over a week in September were “not cash collateral for deposits” from IL&P.

This raises the prospect that one of the banks may have mislead investors about the nature of the transactions.