ANALYSIS:A FORMER senior manager at Anglo Irish Bank said that a bad debt relating to loans made on share purchases to be included in the bank's 2008 accounts, was "potentially misleading" as the sum was six times higher than the figure to be disclosed in the annual report, writes SIMON CARSWELL

Matt Moran, Anglo’s then head of finance, who has since left the bank, said the €300 million figure was “potentially misleading” as Anglo provided loans of €1.8 billion to customers to buy equities.

Minutes of a meeting of the bank’s senior management team on February 5th, 2009 – three weeks after Anglo’s nationalisation – reveal how they prepared the September 2008 annual report published two weeks later.

The report covered the period when the bank had to reflect controversial €7 billion back-to-back deposit transfers with Irish Life Permanent (ILP) and loans and payments to former Anglo directors.

Hand-written minutes of the meeting reflect the difficulties that the management team, led by executive chairman Donal O’Connor had in compiling the report to take account of the investigations and the future risks facing the bank.

The management team discussed how the bank would report that it was writing off €300 million on loans provided where the only security was shares in the bank, which became virtually worthless after nationalisation.

The figure included write-offs on the loans provided to Anglo’s “Maple 10” customers who bought shares in the bank during the summer of 2008 – due to businessman Seán Quinn unwinding his interest in the bank – in order to prevent the stock collapsing.

Mr Moran said the figure for Anglo shares was €300 million; this was crystallised and “a hard amount” for the bank’s shares, he said, but he expected increases in the bad debt charge on other equities. Mr O’Connor said the wording relating to this had to be consistent with his chairman’s letter to be included in the accounts, which had already been sent to the Department of Finance.

At the meeting, which was chaired by Government-appointed director Frank Daly, it was discussed how Anglo would word and treat details of customer deposits and the ILP deposits. The minutes say the wording on this was with Anglo’s auditors, Ernst Young and had also been given to the Financial Regulator, but the department had not replied on this. The wording on the deposits was not signed off.

The meeting was also told that Anglo had paid €3.8 million to former executive Tom Browne when he retired in November 2007 – and not €2.6 million as previously thought – for his years of service. The higher figure had only become known two days earlier, said Mr Moran, as the composition of the figure was different.

Mr Daly said that such payments were “pretty rare”. Part of the payment was made as Mr Browne had agreed to waive his deferred bonuses which the bank paid over a three-year period.

It was queried at the meeting whether the accounts should say part of the payment was due to him waiving his deferred bonus.

Mr Daly said that this could be a “problem for Tom” as there could be a tax liability on the bonus. The bank’s other Government-appointed director, Alan Dukes questioned whether it was a policy at Anglo to make such payments to departing senior executives.

The meeting was told that this was not bank policy, but Mr O’Connor said payments had been made to former executives John Rowan and Tiarnan O’Mahony.

The meeting also discussed how it was going to address the issue of “reputational risk” in the bank’s 2008 annual report, given the controversies that had plagued the bank and its nationalisation.

Mr Dukes said they needed to be careful to reflect in the report that “what we’re doing now conveys before” and stressed that it was important that they “don’t add to reputational risk”.

Another Anglo executive Colin Golden said that they could take out the paragraph on reputational risk if they were “not happy with it” as it was “not required”, but Mr O’Connor said it should be left in. The meeting discussed whether they should include deferred bonuses to Anglo executives in a note on managers’ remuneration.

Declan Quilligan, the bank’s chief operating officer, said that the bank had not previously disclosed deferred bonuses separately from aggregate pay to executives. This would be “hugely provocative with staff and media”, he said, according to the minutes.

Mr O’Connor suggested that the bank only publish the aggregate amount and “make no reference” to the deferred bonuses owing. The management team decided to take the word “normal” out of a reference to loans to directors being given on commercial terms due to the inquiry by the Director of Corporate Enforcement.

A senior Anglo executive also queried whether it was necessary to mention “nationalisation” three times in the report. Four others present, including Mr Daly and Mr Dukes, said it was necessary.