Letters reveal serious tensions between IBRC and Department of Finance

Serious tensions between the Department of Finance and the senior management and board of Irish Bank Resolution Corporation go back to the establishment of IBRC in July 2011, according to documents released to The Irish Times under the Freedom of Information Act. They show a series of letters and emails indicating disagreement and "conflicts" on the level of control the department should exercise over the bank.

At one stage, in October 2011, former IBRC chairman Alan Dukes referred in a letter to the “bad blood” between the department and his management team, which he said “simply wants to get on with the job.” He said “dire consequences” would have resulted in some cases had the bank followed departmental instructions rather than making its own decisions.

Disagreement

Previous FOI documents released to The Irish Times showed the level of disagreement that existed on a range of issues in 2012, around the time of the Siteserv sale. However, the new documents, released as the Government announced an investigation into some IBRC decisions, show tensions were long-standing and generally related to the appropriate level of control the department should exercise over the bank.

In one letter sent by Mr Dukes on September 5th, 2011, to John Moran, then head of bank restructuring at the department, Dukes points to the huge international uncertainties and the difficulties facing the Irish banking sector. Against this background, he accuses the department of “fiddling while Rome burns” in trying to control the organisational structure of IBRC and “a departmental disposition to micromanagement”.

The documents also show that about this time Dukes and Moran had discussed Moran’s possible appointment to the IBRC board, with Dukes saying in the same letter he could not see how a person with Moran’s range of responsibilities would have time to contribute as a board member. The following March, Moran was appointed secretary general of the department.

Macro challenges

In his reply to Dukes’s letter, sent on September 30th, 2011, Moran notes that “you should rest assured that I also find time to consider the more macro challenges facing the banking sector and the country.”

He says he would prefer that “alignment of interest between the State as shareholder and your management’s views might take place more easily as it would consume less of my time.”

He added that “in the light of so many conflicts between the views of the State (and its advisers) and your management, I have felt the need to give full and ample time to you and your management” to understand the bank’s position.

Dukes replied on October 6th that there had been “numerous” cases in which the bank’s board and management had different views to the department and the National Treasury Management Agency (NTMA) and had taken their own course of action.

“In each case it has been proven that the bank’s position and subsequent path were correct,” while in some cases “dire consequences” would have followed if the department/NTMA route had been followed. “This highly competent management team simply wants to get on with the job,” he added.

Irish Nationwide loan book

The relationship seemed to have become more tense moving into Autumn 2011. A mail from Moran to Dukes in early August was relatively friendly in tone. However, by the end of August Michael Torpey, a senior departmental official, wrote to then IBRC chief executive Mike Aynsley after the banker had refused a request to meet another departmental official in relation to the Irish Nationwide loan book. Irish Nationwide was merged into IBRC alongside Anglo.

Aynsley said this wasn’t a matter for the shareholder (the State), according to Torpey’s note. Torpey added: “Any requests, policies or instructions from the Department of Finance or its representatives . . . should therefore be addressed immediately by the bank.”

In his reply, Aynsley said the matter about which the official wanted to meet was not significant enough to be of interest to the shareholder and the department could download information on it from the eTender website. However, he said that, under the relationship framework put in place after Anglo was nationalised, staff were not obliged to “blindly accept and action any directions whatsoever” from the department.

Much of the subsequent correspondence released features discussions on a new relationship framework, with Aynsley at one stage saying his board was unhappy with the level of control proposed.

Agreement was reached subsequently and the new framework was put in place just after the sale of Siteserv in March 2012.