CONCERNS ABOUT the potential fallout from the flattering €7 billion in deposits circulating from Irish Life Permanent into Anglo Irish Bank in 2008 have been raised in discussions around the bids for State-owned Irish Life.
It is understood that parties interested in acquiring Irish Life have queried whether the assurer is likely to face regulatory fines in the future or whether senior management will be forced to stand down arising from the Central Bank’s fitness and probity tests.
Concerns have also been raised about the possible effect on Irish Life’s reputation arising from any regulatory reprimands imposed on the company arising from its role in the controversial deposits.
The €7.2 billion “window-dressing” deposits were transferred to Anglo in the run-up to the bank’s financial year end on September 30th, 2008, to make the bank’s financial position look healthier than it actually was.
The money came from Anglo in circular transactions that went into Irish Life Permanent’s banking division Permanent TSB and were returned to Anglo through Irish Life Assurance.
The company’s fund management business, Irish Life Investment Managers, which is being sold with Irish Life, was also involved in the deposit transfers.
A spokesman for Irish Life Permanent declined to comment.
Canada Life, which is owned by Great West Lifeco, the second-largest insurance company in Canada, is the leading candidate to take over Irish Life. The price involved is in excess of €1 billion.
Other interested parties include a joint venture comprising JC Flowers and Apollo Capital Management, and CVC Capital Partners.
The company flagged potential issues over the Anglo Irish transactions in a prospectus posted to shareholders in November 2009 when the group was restructuring under a new holding company.
“The group is exposed to litigation and regulatory litigation risks including risks arising from transactions with Anglo Irish Bank Corporation,” the prospectus said.
The prospectus said the company had “engaged with and promptly responded to” each of the investigations into Anglo.
“These investigations could give rise to claims against the group and, depending on the outcome of any investigations, enforcement authorities may seek to impose substantial fines and penalties on the group,” the company said.
The maximum fines the Central Bank can impose on a financial institution is €5 million and on an individual is €500,000, but the regulator is seeking to double these under new legislation.
Irish Life is being sold by the Government to cover some of the €4 billion cost of recapitalising the company imposed by the Central Bank under the terms of the EU-IMF loans to the country.
The Government effectively nationalised Irish Life Permanent in July by injecting €2.7 billion. If a sale of Irish Life is not completed by the end of the year – the Central Bank’s recapitalisation deadline – the Government is likely to inject the remaining €1.3 billion.
