BUSINESS OPINION:There is something very wrong with the culture at AIB and its attitude towards the State

THE IMPASSE over the appointment of a replacement for Eugene Sheedy at AIB is an interesting vignette that captures much of what is wrong with the attitude of the Irish banks and also the Government’s approach to its dealings with them.

The board of AIB appears to be determined to stick by its preferred candidate, even though the Government has made it clear the appointment of an insider is not a runner. It is an unfortunate situation for the individual involved, Colm Doherty, the head of the capital markets division. But given the nature of the job and the events that have led to its becoming vacant, he can hardly be surprised.

AIB has been rescued by the taxpayer and that makes politics and public opinion a factor in the appointment of a chief executive. And in this case their wishes have the added bonus of making sense. Something went badly wrong at AIB and the other banks and bringing someone in from the outside is the best way to drive reform.

Unfortunately, the decision of AIB to face down the Government indicates that the amazing arrogance that has characterised AIB’s behaviour over the last 12 months – and no doubt contributed to the mess it has found itself in – remains undiminished.

It is hard to credit such hubris. The board of AIB lost its moral authority on that night last September when it went to the Government looking for State support and got a blanket guarantee from the taxpayer.

However, the penny did not appear to drop with AIB and the bank has pretty much fought the Government at every turn since then. Ungracious does not even come close to describing its attitude to the Government which pretty much had to force the bank to take fresh capital.

The grudging acceptance by former chairman Dermot Gleeson and outgoing chief executive Eugene Sheehy of the need for them to accept personal responsibility pretty much put the tin hat on it.

Even the creation of the bank-friendly National Asset Management Agency to clean up the mess it has made and which could cost the tax payer billions, has not softened the bank’s cough if its attitude to the appointment of a new chief executive is any yard stick.

In one way it is quite understandable. The bank’s unjustified arrogance has paid some dividend. It has allowed it to capitalise on moments of indecision and a lack of confidence by the Government at various stages.

Along with the other banks AIB was able to persuade the Government to bring in the guarantee, which has now become a millstone around the taxpayers’ neck. More importantly, it has succeeded in convincing the Government that the avoidance of bank nationalisation should be a policy objective rather than something dictated simply by whatever is expedient in the national interest.

All in all the banks have done extraordinarily well given the paucity of their hand – bankrupt and still in business only thanks to the support of the taxpayer. Their “success” in shaping the Government’s response to the banking crisis can only have reinforced their sense of superiority over what they presumably see as a fairly inept Government.

The Government’s failure to assert itself over the issue of the AIB chief executive also reinforces this dynamic. Its reticence goes beyond the need to respect legal niceties of appointing a chief executive of a bank.

It echoes the indecision that has characterised some of the worst decisions made over the past 12 months. The procrastination over Anglo Irish Bank and the inexplicable delay in forcing the departure of Michael Fingleton from Irish Nationwide Building Society are two glaring examples.

The Government’s lack of authority is as hard to understand as AIB’s arrogance.

The Government may have stumbled through much of the last 12 months, but it can with some justification say it has a better grip on things now. Admiration for the Minister for Finance is growing in business circles.

The idea that the Government will now allow itself to be bullied into accepting an insider at AIB by a discredited board is bizarre.

The mere fact that a standoff has arisen in the way it has only confirms that there is something very wrong with the culture at AIB and its attitude towards the State.

The view from bank centre would very much appear to be that the State is there to serve AIB’s interests rather than the other way around.

It is something that has to change and appointing an outsider is the way to make that happen.