Senior AIB management allowed Mr Charles Haughey's debt to "run on" even though his bank manager formally sought permission in 1977 to bounce his cheques if he breached his overdraft again.
The tribunal heard that the bank manager wanted "somebody higher up" to make the decision and to direct him to dishonour Mr Haughey's cheques. Counsel for the inquiry, Mr John Coughlan SC, said "he was not going to do it off his own bat".
The former Taoiseach's debt had risen to £401,929.77 at that time. Internal AIB documents show that a senior executive told the bank manager he should contact the area office if further cheques "have to be deferred", and wondered if Mr Haughey had given any indication that he would hand in his chequebooks.
In an internal memo, Mr Michael Phelan, then manager of AIB in Dame Street, Dublin, wrote to the area advances manager in April 1977 when Mr Haughey's debt to the bank had risen to £401,929.77.
The manager met Mr Haughey and discussed his exceeding the outside limit of £350,000 on his overdraft, and that he had not honoured his promise to pay the half-yearly interest in 1977.
The memo states that "at the interview it became clear that he was unable to bring the accounts within the overall limit of £350,000 but he did give his firm undertaking that apart from the cheques which were at that time outstanding, he would not draw further on us".
The document also says that "it was made clear to him that if he failed to honour his undertaking we would be forced to dishonour his cheques. It is our firm intention to keep him to this promise and your confirmation that it will be in order for us to take this course is requested." Mr Coughlan said the branch manager was looking for "somebody higher up in the bank" to take a decision if cheques were to be dishonoured. Mr Coughlan said that even though there was some discussion of not honouring cheques, when the facility had been breached again, it did not overly concern Mr Haughey. The former Taoiseach replied that the atmosphere at this stage was "somewhat more relaxed" and not as "ominous" has it had been a year before.
Mr Coughlan said that the previous year, 1976, there were heated discussions about the chequebooks. He asked was it conveyed to Mr Haughey that the outstanding cheques would be met. Mr Haughey said he supposed it was.
The written reply from the area advances manager said that "it is most disappointing to note that the indebtedness has increased substantially over the limits sanctioned by the board in December last".
The manager added: "There can of course be no question of increasing the limits beyond £350,000 and accordingly it must be clearly pointed out to Mr Haughey that the advance is to be brought back to within these limits at the earliest possible date."
They would allow matters to "run on for the present bearing in mind his firm promise that he will not draw on you further. In this connection we are wondering has he given any indication that he would hand in his chequebooks?"
