Regulator denies it knew of Anglo Irish share deal

DUBLIN, Feb 15 - Ireland's financial regulator on Sunday denied it had known of a controversial deal relating to the purchase of Anglo Irish Bank shares in 2008 by a "golden circle" of ten investors.

The regulator was responding to a report by the Sunday Times which said Anglo Irish Bank had given a 300 million euro ($387.5 million) loan to ten investors, asking them to invest it in Anglo stock to prop up its share price.

The Sunday Times said officials at the regulator, the central bank and the finance ministry had advance knowledge of the deal.

"With reference to the story in today's Sunday Times ('Anglo told regulator of share deal'), the Financial Regulator categorically rejects the claim that it was aware of any so called 'sweetheart deal' relating to the purchase of Anglo Irish Bank shares in 2008," the regulator said in a statement.

"Similarly, the central bank would have had no knowledge of these issues," a spokesman for the central bank added.

An Anglo Irish Bank spokeswoman said it had a policy of not commenting on shareholders or shareholders' transactions.

The bank also said it would publish its full accounts for the year to the end of September 2008 on Feb 20.

A spokesman for the finance ministry said: "We did not have knowledge of the details of the transactions in advance."

The regulator said it and other authorities had been aware of large contracts for difference (CFD) positions held in Anglo shares in 2008 and steps taken to unwind it.

"The Financial Regulator was not aware of the identity or the financing arrangements of a so called 'golden circle' of ten investors," it added.

"These details emerged during the due diligence process carried out in the lead up to the nationalisation of Anglo Irish Bank," it said.

"The Financial Regulator is currently investigating all aspects of the unwinding of this large CFD position in Anglo Irish shares, including the nature of loans to a group of investors and in particular the non recourse nature of these loans with a view to pursuing and assisting in whatever action is necessary including appropriate legal proceedings."

CFDs are derivative instruments that can give exposure to a stock without physically owning it -- a method that was used by the Quinn Group, one of the largest family-owned businesses in Ireland, to build up a stake in now-nationalised Anglo Irish Bank, before buying a regular 15 percent stake in July.

The Sunday Times mentioned the Quinn Group in its report, but the regulator did not name whose CFD stake it was referring to. A Quinn spokesman said the group would co-operate fully with any investigation undertaken by the authorities. He declined to comment further.

REGULATORY OVERHAUL

The regulator's statement came as the Irish government stepped up calls for a "root and branch" reorganisation of the financial regulatory system to repair damage to Ireland's international reputation from a series of bank scandals.

The regulator on Friday said it had found certain "circular" deals between bancassurer Irish Life & Permanent and Anglo Irish Bank unacceptable and sent investigators to their offices.

Three top IL&P executives resigned in the scandal, the latest to taint the image of Ireland as an investment destination, following separate revelations about director's loans which led to Anglo's nationalisation in January.

"The job we have to do is improve the regulatory system, because it clearly hasn't been working sufficiently to inspire public confidence in recent time -- so that where there is any wrong doing, we can identify it and deal with," Prime Minister Brian Cowen said.

"The impact of these issues on our reputation is not helpful in the context of trying to maintain stability in our financial system domestically at the moment," Cowen said in an interview with the Sunday Independent newspaper.

IL&P revealed it had made 7.45 billion euros ($9.6 billion) in short-term deposits to Anglo Irish Bank in September in what it said was support for Anglo Irish during a period of unprecedented crisis, when world credit markets were buckling.

It said the transactions were fully and appropriately accounted for in its books and records and in its regular reports and returns to the financial regulator.

But the regulator has been investigating whether Anglo Irish, nationalised last month after a separate directors' loan scandal, used the funds to artificially boost its financial health.

The deposit revelations at Anglo Irish eclipsed Dublin's efforts this week to restore some credibility to its banking sector and the wider economy with a 7 billion euro bailout for its top two lenders, Bank of Ireland and Allied Irish Banks.

Anglo Irish Bank said on Friday that it was conducting a comprehensive review of the transactions and confirmed that it had "sought and received deposits" from IL&P during 2008, including the last two weeks of September.

It said all transactions have been appropriately recorded in its books and records and financial statements and in its daily, weekly and monthly regulatory returns.

Former Anglo Irish Bank chairman Sean FitzPatrick admitted in December that he had misled investors about 84 million euros in loans from his bank. His statement helped trigger the bank's nationalisation in January.

When he resigned FitzPatrick said he had not in any way breached banking or legal regulations, but his actions had been "unacceptable from a transparency point of view".

The chief executive of the financial regulator has also quit over the handling of the directors' loan scandal at Anglo. ($1=.7742 Euro)