THE DEPARTURE of Anglo Irish Bank chairman Seán FitzPatrick and its chief executive David Drumm mark a drastic erosion in the credibility of the board of an institution that has lost 97 per cent of its market capitalisation in the last 12 months.
Their resignations come a fortnight after Anglo set aside €500 million to cover unspecific loan losses, as pretax profits for the year to September 2008 fell to €784 million from €1.24 billion.
Anglo shares immediately dropped 37 per cent and continued afterwards to slide.
In its most recent annual report, for 2007, Anglo said "loans to directors are made in the ordinary course of business on commercial terms in accordance with established policy". The aggregate balance of directors' loans was €41 million at the end of the fiscal year, up from €31 million in the previous year.
Statements issued by the bank and Mr FitzPatrick show now that these figures were, at best, fictitious. What is more, declarations in this category in Anglo's seven previous annual reports are now known to be essentially false.
The forthcoming annual report, to September 2008, will show in the note on directors' loans that Mr FitzPatrick had fully secured loans totalling €87 million.
"This balance is substantially higher than in the 2007 report because in prior years I had temporarily transferred my loans to another bank before each year end. I had done this on my own initiative over an eight-year period," said Mr FitzPatrick.
In the 2007 report, the directors say the "chairman promotes continuing high standards of corporate governance and ensures there is effective communication with shareholders. He is responsible for the leadership and effectiveness of the board and the non-executive directors in particular".
Those who signed off on the report included Mr FitzPatrick, Mr Drumm and "independent non-executive director" Lar Bradshaw, who resigned because he jointly held an Anglo loan with Mr FitzPatrick which was temporarily transferred to another bank.
The other executive directors who signed off on the 2007 report were: Willie McAteer, finance director; Declan Quilligan, head of UK operations; Pat Whelan, managing director for Ireland; and Tom Browne.
Mr Browne has since left Anglo, as has businessman and public relations consultant Fintan Drury, an independent non-executive director in 2007.
The other non-executive directors in 2007, who remain on the board, were: Gary McGann, chief of Smufit Kappa; Ned Sullivan, chairman of Greencore; Anne Heraty, chief of CPL Resources; Michael Jacob, chairman of Slaney Foods; and Noël Harwerth, deputy chairman Sumitomo Mitsui Banking Corporation.
In remarks on corporate reponsibility in the 2007 report, Anglo said: "The way we conduct our business is guided and underpinned by a set of core values and principles which ensure the bank operates in the best interests of all stakeholders. We operate to the highest ethical and governance standards as we aspire to be a model corporate citizen."
