STATE-OWNED Anglo Irish Bank plans to reject proposals by the bank’s former chief executive David Drumm to settle its legal action aimed at securing repayment of loans of €8.3 million from him.

Mr Drumm has made a series of proposals to settle his debts, but Anglo is understood to be intent on securing full repayment and will not settle for a lesser sum.

It is understood Mr Drumm has proposed handing over his multimillion-euro pension to Anglo, which would be used to settle his debts. Under his pension, he is entitled to annual payments of €271,000 a year when he reaches 55, valuing his pension at more than €5 million.

Mr Drumm’s pension fund would be reduced in value if the bank were to draw on it in advance of him reaching retirement age, which is in part discouraging the bank from accepting his proposal.

He claims Anglo owes him €2.6 million in salary, pension and deferred bonus payments and also wants damages, including for mental distress. He has also proposed offsetting these debts against his loans in settlement of his outstanding liabilities at Anglo.

Mr Drumm is understood to claim that the bank has set aside all but €1.65 million of his outstanding loans to cover potential loss in Anglo’s most recent accounts and would recover a sum in excess of this if the bank accepted his settlement proposals.

Anglo has sought a full statement of Mr Drumm’s assets and liabilities and is intent on forcing him to liquidate assets to repay his loans in full and to agree a repayment schedule to meet any shortfall on his debts arising from the proceeds of those asset sales.

The commercial division of the High Court was told yesterday that Mr Drumm had made a series of proposals to the bank to reach a settlement of the bank’s action.

No details of the proposals were mentioned during the hearing.

Mr Justice Peter Kelly asked the bank to indicate to the court in two weeks’ time whether it was saying yes or no to the settlement offer.

Declan McGrath, for Mr Drumm, had earlier told the judge proposals had been made in an open letter from Mr Drumm to Anglo two weeks ago, but there was as yet no “substantive” reply.

His side were anxious to know Anglo’s response as this would impact on the costs being incurred in preparation for the hearing of the proceedings against Mr Drumm, due to start on October 26th, counsel said.

John Hennessy SC, for Anglo, said Mr Drumm’s letter was “under consideration”. When Mr Justice Kelly asked when there was likely to be a response, Mr Hennessy said he could not say.

The judge said the bank had had the letter for two weeks. It was a matter of “yes or no” and it should indicate to the court in two weeks’ time what its response was.

Earlier, the judge awarded costs to Mr Drumm’s side arising from the resolution of discovery issues between the sides.

After receiving an additional affidavit from Anglo chief executive Mike Aynsley, outlining the basis for the bank’s claim of privilege over certain documents being sought by Mr Drumm, including documents relating to directors’ loans and e-mails between former Anglo chairman Seán FitzPatrick and Mr Drumm, Mr McGrath said his client was no longer seeking those documents.

Mr Justice Kelly ruled Mr Drumm was entitled to the costs of the motion over privilege as the court had ruled the initial claim of regulatory privilege was not fully set out by Anglo and because the court directed an affidavit of discovery from Mr Aynsley had to be amended to conform with the court rules. In his latest affidavit, Mr Aynsley said the class of privilege being asserted over the documents was litigation privilege.

The bank was not asserting privilege on behalf of any other entity or individuals and was not seeking to protect individuals, he said.