ANGLO IRISH Bank has said the Financial Regulator could impose substantial penalties and revoke its banking licence arising from its investigation into the lender.

The bank’s new chief executive Mike Aynsley was outlining yesterday, in an affidavit in Anglo’s case against his predecessor David Drumm, why it asserted privilege over records sought by the regulator and the Director of Corporate Enforcement.

He said the class of privilege being asserted over the documents at issue was litigation privilege. The bank was not asserting privilege on behalf of any other entity or individuals, but on its own behalf and was not seeking to protect individuals.

Anglo was subject to several regulatory and criminal investigations and also a party to 22 civil claims arising from the matters under investigation, he said. As chief executive, Mr Aynsley said he regarded the potential for criminal or regulatory sanctions against it as “a very serious matter” and he was equally concerned about the prospect of a large volume of civil litigation. “Since joining the bank, I have proceeded on the basis that there is a prospect of the bank as it is currently constituted being prosecuted.”

The bank believed there was a prospect of action being taken against it by the regulator over directors’ loans and that the bank took steps, including generating documents over which the bank is asserting litigation privilege in the Drumm case, in that context.

“The consequences for the bank of the imposition of such sanctions are serious and could include substantial financial penalties and/or the revocation of the bank’s licence,” Mr Aynsley added.

Anglo was entitled to fair procedures and natural justice in the context of the investigations.

He said the documents to which the privilege claim related concerned directors’ loans, “one of the so-called legacy issues under investigation”, and the relevance of many of them to the issues in this case was “tangential”.