Bank denies early knowledge of Ansbacher

The Central Bank had no knowledge of the controversial Ansbacher deposits uncovered by the Dunnes payments tribunal, according to its governor, Mr Maurice O'Connell. In a letter to the Minister for Finance, Mr McCreevy, the governor says there is no record in the Bank that it had discovered the system for operating the Ansbacher accounts, which were held in Guinness & Mahon (G&M) bank in Dublin for many years.

Prior to the publication of the tribunal report, "the Central Bank had no knowledge of the existence of the Ansbacher deposits . . . or of the role of G&M in the management of these deposits", according to Mr O'Connell's letter, revealed by Mr McCreevy in the Dail yesterday.

The letter formed part of the follow-up to the tribunal report, during which the Minister asked Mr O'Connell to report whether the board of the Bank was satisfied with the powers available to it to regulate the financial sector.

In relation to Guinness & Mahon, Mr O'Connell said the Central Bank had not been informed of concerns raised by the Irish bank's parent, Guinness Mahon Company Limited of London, about the Ansbacher accounts, as part of an internal audit in 1989.

It had only become standard practice in the 1990s for the central banks in Ireland and elsewhere to seek all material internal audit reports, he said.

However, while the Central Bank was not aware of the Ansbacher accounts, it did discover in 1988/90 that G&M in Dublin was in breach of the requirements that liabilities to any one inter-bank depositor should not exceed 15 per cent of total assets.

This indicates that the Central Bank was aware that G&M in Dublin held large deposits - which the tribunal said totalled £38 million at one stage - on behalf of another bank depositor, even though it was not aware of the details of these accounts.

The Central Bank identified this breach in 1989, according to Mr O'Connell and it "was eliminated stepwise within two years of the matter coming to light".

Before 1988, there was no breach of regulations, he said, as, at that stage, the deposits were held by G&M in Dublin on behalf of another Guinness Mahon subsidiary in the Cayman Islands. Guinness Mahon sold its Cayman Islands operation to Ansbacher in 1988.

In relation to the bank's overall regulatory powers, Mr O'Connell tells the Minister that the Bank's board believes they "are generally adequate". It is in discussion with the Department of Enterprise, Trade and Employment on legislative amendments on the regulation of retail investment intermediaries, recently taken on by the Bank.

The governor said that the Bank perceived "a distinct lack of compliance culture" among these retail intermediaries, which will require "significant efforts" by the Bank to address.

In his Dail reply, Mr McCreevy said he was still awaiting advice from the Director of Public Prosecutions on whether he could publish the Central Bank report on possible exchange control breaches identified in the tribunal report.

He said he had been advised that the Central Bank is prohibited from disclosing information to the authorities, including the Revenue Commissioners, unless it suspects criminal activities, in which case it must report to the Garda.