ANGLO IRISH Bank chairman Seán FitzPatrick resigned last night after it emerged he had temporarily transferred €87 million in loans with Anglo to another bank before the group's September 30th year-end. The transfers - which took place over eight years - were in order to avoid disclosing the loans to shareholders.
While not illegal, the transfers were deemed "inappropriate" and "unacceptable" in terms of the bank's corporate governance.
Lar Bradshaw, a non-executive director with Anglo, has also resigned. He held a loan jointly with Mr FitzPatrick, which was temporarily transferred to another bank before Anglo's year-end.
Anglo's non-executive director Donal O'Connor has succeeded Mr FitzPatrick as chairman. He joined the Anglo board in June.
In a statement last night, Mr FitzPatrick said: "The transfer of the loans between banks did not in any way breach banking or legal regulations. However, it is clear to me, on reflection, that it was inappropriate and unacceptable from a transparency point of view.
"One of the loans was a joint loan with Lar Bradshaw and I would like to emphasise that he had no knowledge of the temporary transfer of this loan."
Anglo said Mr FitzPatrick's decision to resign was "based on the fact that, over a period of eight years to 2007, he temporarily transferred loans with Anglo Irish Bank to another bank prior to the group's year-end.
"This transfer of loans did not breach banking or legal regulations. It was, however, inappropriate from a transparency point of view."
Anglo added that all of its other directors had confirmed they had "not engaged in this or in any other inappropriate action in relation to their loans".
It said all directors' loans were agreed on normal commercial terms and conditions. Anglo added it had initiated a formal review of governance relating to the directors' loans. "This review will be carried out using independent expertise," it said.
The other bank involved in Mr FitzPatrick's loans was not named but it is believed to be Irish Nationwide Building Society, where the year-end occurs on December 31st. Any loans transferred to Irish Nationwide would have been transferred back to Anglo after September 30th, and so would not need to be disclosed to Anglo shareholders or at Irish Nationwide.
Mr FitzPatrick has thus become the first high-profile casualty in the Irish market of the global financial crisis.
His departure after 33 years with the bank, which he served as chief executive for 18 years to 2004, has created yet more uncertainty around the bank's future at a time when it has already seen 97 per cent of its share value disappear this year.
Minister for Finance Brian Lenihan last night reiterated his "commitment to underwrite the capital needs of Anglo Irish Bank on appropriate terms".
Mr FitzPatrick has also resigned his non-executive directorships with Aer Lingus, food company Greencore and packaging group Smurfit Kappa. The Financial Regulator launched an investigation into Mr FitzPatrick's loans earlier this week, sending a team of inspectors into Anglo's headquarters on St Stephen's Green in Dublin.
"While it does not appear that anything illegal took place in relation to these loans, the Financial Regulator was of the view that the practices surrounding these loans were not appropriate," the regulator said in a statement.
Anglo's annual report is expected to be published in the next fortnight.