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The Irish government today agreed to plough up to 4 billion (£3.5 billion) of emergency funds into Anglo Irish Bank after the nationalised lender reported record losses.
Anglo Irish, which was put under state control in January after a string of scandals, shocked the financial markets when it admitted it made losses of 4.1 billion in the six months to the end of March.
The deficit — a record for a bank in Ireland — was driven by a sharp increase in the number of property loans turning sour in the recession and underlined the spectacular fall from grace suffered by the bank and the “Celtic Tiger” economy.
It also highlighted how the property speculation and reckless lending which drove Ireland's boom is now fuelling its decline.
Irish finance minister Brian Lenihan described the loss as “deeply disappointing” and agreed the taxpayer-funded rescue to save it from collapse. “It is important to remember that this is the first time we have put money into Anglo Irish Bank,” he said.
The Irish regulator also temporarily excused Anglo Irish from some capital requirements to relieve pressure on the bank.
Executive chairman Donal O'Connor, who replaced disgraced former chairman Sean Fitzpatrick, said: “The bank is very conscious of its responsibility to the taxpayer. The minister's decisions place the bank on a sound financial footing and we are determined to repay the taxpayer by creating a viable, efficient and respected bank.”
He blamed lending blunders for the losses and said the past six months were very difficult for the bank.
O'Connor said: “Clearly the bank made mistakes in recent years, particularly in relation to property development in Ireland.
“Our rate of growth and risk appetite at the top of the economic cycle was imprudent and the stark evidence of this is seen in today's figures.”
A number of top executives were forced out of the bank after a mult-billion euro loans fiasco was uncovered in December and Anglo Irish is now being investigated by white-collar crime watchdogs. Fitzpatrick resigned after admitting he had concealed millions of euros in personal loans from the bank.
