Category Archives: Overcharging

12/6/15: Anglo Overcharging Saga: Ganley Affidavit of 2013

Here are some select quotes from the Affidavit, filed by Mr. Declan Ganley on August 12, 2013 with respect to his knowledge about the share interest rate rigging practices at the Anglo Irish Bank as covered in my earlier posts here:
and implications of which are discussed here:

Per Mr .Ganley's Affidavit: he met Mr. R.K. - former executive in Anglo Irish Bank in October 2010 and during the course of his discussion with Mr. R.K., Mr. R.K. "told me that one of several areas that should be pursued should be the opportunistic over charging of interest rates targeting multiple customers of Anglo. He said that it wasn't a great secret within Anglo and that it had been standard practice for many years. He said that the skim on these loans was jokingly known as "TIBOR" after a Mr. Tiarnan O'Mahoney, who he said oversaw this practice at the bank. He explained that TIBOR was the fake rate that Anglo would apply, pretending that it was the daily DIBOR rate. He said that it would be easy to check, by just looking into what the actual DIBOR rate was on a given day and then checking what Anglo had reported it to be to various customers. The resulting mark up would go to Anglo's coffers."

Now, take a slightly different angle on this. Suppose you go to a Bank and ask for a tracker mortgage loan. Suppose you get a quote of "ECB rate plus 1%". You take the loan and subsequently receive a statement that your interest rate charged in the past month was 1.35%. Except that 1.35% = ECB rate of 0.05% + 1% declared margin + 0.3% clerk-own make up margin. You contracted to pay 1.05%. You paid 1.35%. The clerk pocketed 0.3% as personal gain. How fast would the law be brought down on that clerk's case? Oh, in a nanosecond.

In Anglo's DIBOR case, there is no law being brought down on anyone. Because a bank engaged in defrauding customers is not the same as a clerk engaging in defrauding customers.

"I expressed a certain degree of disbelief that such a practice could run for more than a year or two without someone spotting it, a regulator, auditor, a professional investor (e.g. a bond investor) or other. I also said it was hard to imagine that the practice was well known."

"Mr. R.K. then said that not only was it the case but that he even had a copy of internal Anglo Irish Bank minutes where it was covered as a matter of fact practice."

Now, note, the above alleges explicitly that the fraud was conducted repeatedly, regularly, knowingly and was approved by the bank.

"He offered to show me a copy, I said "yes" and he proceeded to produce a copy of a document that appeared to be minutes of an Anglo Irish Bank meeting covering TIBOR. I then made arrangements to forward a copy of the document to a media outlet in London, who proceeded to use their documents as part of their basis for a report on the "TIBOR" story…

One of the pages was a schedule of "TIBOR" rates that the bank has charged to their clients as genuine DIBOR rates over a provisos period. I checked these rates against the official rates for the same period and confirmed that none of the rates replicated the actual published DIBOR rates. It appeared from the documents that, per Mr. R.K.'description, the official DIBOR rates had all been randomly and substantially loaded by differing amounts by Anglo Irish Bank."

Now, let us return to that clerk in your local bank example. Suppose that there is evidence showing that the said clerk perpetrated the same fraud time after time after time with all borrowers who came to his office to secure a mortgage. And that he notified his superior of this fraud and arranged to report regularly on his progress of defrauding banks' clients. How long will it be, in your view, before the weight of law is brought down onto the bank clerk's superior?

We had several cases in the past when bank employees would engage in stealing clients funds. These cases were prosecuted, wrong was addressed and clients were compensated. But when it comes to "TIBOR", even after two courts establish evidence that Anglo Irish Bank engaged in sharp practices, and years after this is notified to the Irish authorities by the likes of Mr. Ganley and John Morrissey and John Flynn and others, there is static silence in the air on the topic from all Irish authorities concerned.

And this is a simple, established, evidence-backed case. What can we expect from a much more complex inquiry into business dealings of IBRC? And more importantly, what can we expect from any attempt by the State to even look into how Nama has been running its business?

Nope, I don't have much of conviction we will see a definitive conclusion to this Anglo/IBRC saga any time soon.

Note: Mr. Ganley's affidavit references the fact that in late 2010 the TIBOR scandal was made public in international press and through other media channels. In other words, Irish Government and authorities were aware of the problem since then. They are yet to reply on how it can be rectified.

11/6/15: Full Letter Concerning IBRC Overcharging

Yesterday, I posted about Deputy peter Mathews' speech in the Dail concerning the egregious sharp practices in the Anglo Irish Bank and IBRC (link here). Today, I posted my point of view taking these practices to the macro level in relation to the remaining legacy of Anglo/IBRC (link here).

In his speech, deputy Mathews quoted from the Black & Company Solicitors' letter on behalf of Mr. John Morrissey and I quoted from the same some more in my post (linked above).

Here is the actual copy of the letter (I had to break it into segments in order to post on this platform). All sections are sequential and reproduce the letter in its entirety. You can click on each segment to enlarge.

I provide no comment beyond what has been already provided in the two posts linked above.

11/6/15: Anglo’s Toxic Legacy: It Is Still Around Us, Today…

Here is an edited version of a note from 4Q 2014 that I provided to a non-commercial party interested in the matters of the Anglo Irish Bank that outlines my view of the sharp practices at the bank and the spillover from these practices across Irish banking, economic and political systems.

"As you know, Ireland was forced by the ECB and the EU to bail out its banks. The most egregious case involved Anglo Irish Bank - a mono-line property lender that was nationalised on January 21, 2009 and bailed out using Irish Government funding to the tune of EUR29.3 billion.

Funds for this bailout came from a combination of the Troika loans and taxpayers-owned National Pension Reserve Fund and thus, de facto, amounted to taxpayer financing of the bank.

Nationalisation of the Anglo Irish Bank, as we now know, came on foot of the bank, the auditors and regulators failing to report egregious sharp practices in the bank when it comes to the regulatory rules that date from the early 1990s through 2008 and include systemic and wilful overcharging of customers, breaches of liquidity rules, bank providing funding for its own directors on the basis of preferential treatment of public disclosures in collusion with another bank, INBS, bank engaging in misclassification of loans as deposits, and bank providing funding to its own customers for share price support schemes.

Any one of these sharp practices would have resulted in either a bank closure in a properly regulated regime, such as, for example, the U.S., and/or a complete wipeout of the equity value of the bank in the markets.

Two Examples

Take one example of one such practice. The overcharging problem at the Anglo Irish Bank continued from 1990 through 2004, with clients billed on average 0.3% concealed margin on their loans without notification of the customers charged and without disclosure to the auditors. Bankcheck review of the large number of loans revealed that 80% of these were involving overcharging. More importantly, from the point of view of the current situation, the Irish Government agencies, such as the IBRC and Nama, as well as the purchasers of distressed loans from Anglo borrowers, continue to charge the rates that include the original fraudulent mark ups, despite at least one official judgement on the matter issued by the Irish court. Taken in perspective, the overcharging - officially and on the record exposed in Irish and US courts - represents a quantum of estimated EUR1 billion of overstatement of publicly recorded and audited profits declared by Anglo through the period of 2004, and although we have no means for ascertaining the quantum of overcharging since 2004, the figure of at least around EUR2 billion total over the span of 1990-2014 is most likely a conservative estimate. This overcharging was notified to the Irish authorities repeatedly and on the record, with no action taken in response to notifications by the current Government, the Financial Regulator and/or the Central Bank.

In another sharp practice, the bank lent money to a single customer to cover margin calls on CFDs held against the bank own shares and, subsequent to the accumulated loans in excess of EUR2 billion, the bank arranged and funded a buyout facility for 10 investors (also clients of the bank) who were lent funds by the bank predominantly on unsecured basis to purchase shares underlying the said CFD positions. In simple, most basic terms, the bank used its lending book to prevent a share price collapse that could have resulted from the disclosure to the markets of the cumulated CFD positions.


In effect, thus, Irish taxpayers were compelled by the European component of the Troika, the EU and the ECB, in contravention of the IMF advice, to underwrite losses in a bank that was neither systemic to the Irish economy (it had basically no retail deposits and conducted virtually no retail business) nor operated within the confines of banking regulations and laws. On foot of the Anglo Irish Bank rescue, we were compelled to rescue an equally egregious Irish Nationwide Building Society - a counterpart to some of the sharp practices carried out in the Anglo Irish Bank.

Between 2007 and 2013, Irish Government debt rose by EUR155.8 billion - the largest jump in debt relative to GDP of any country in the euro area, including Greece. More than 22 percent of this increase is down to Anglo Irish Bank and irish Nationwide Building Society rescues. 

The damage runs deeper than that, however. If the Irish Government was allowed by the ECB to shut down Anglo Irish Bank prior to nationalisation, Irish Government debt today would have been around 93% of GDP as opposed to the current level of 112%. But this does not take into the account the potential contagion that resulted from the Anglo Irish Bank collapse to other banking institutions in the country. At the time of the September 2008 banking Guarantee, the State and its advisers have argued that not rescuing Anglo Irish Bank would have spread market panic to other Irish banks. 

This claim is, in my opinion, dubious. It could have been as likely, if not more so, that shutting down a rogue institution (or, with INBS - two rogue institutions) in a public and transparent manner could have resulted in more confidence in the systems and procedures present within Irish regulatory and supervisory regime. By opting to preserve and secure Anglo Irish Bank and INBS, Irish Government at the time sent a signal to the markets that any institution, including that with questionable business model, strategy and practices will be preserved and protected. In turn, such a signal was consistent with telling the markets that Ireland has no will to or cannot (due to the limited regulatory abilities) distinguish rogue operators from legitimate and functional ones. The effect of this could have been undermining confidence in all Irish banks, in order to protect a rogue one.

Ireland opted for a solution of shoring up and covering up the structural vulnerabilities exposed by the Anglo Irish Bank practices in the system of our regulation and supervision, as well as governance. This is neither a sustainable strategy, nor is a markets-securing strategy.


The legacy of the Anglo Irish Bank-related debt remains with us. Currently, Irish Central Bank holds some EUR25 billion worth of long-term Government bonds issued to offset Emergency Liquidity Assistance credit line extended to the bank liquidators. Ireland is mandated by the EU and ECB to gradually sell these bonds into private markets. As we do so, the burden of this debt is befalling Irish people who will have to fund interest and principal on these bonds into perpetuity. 

There is an easy solution to this problem that ECB can enact within a minute: the bonds should be left in the Central Bank and cancelled at maturity. This implies no cost for European taxpayers and no new issuance of money by the ECB.

In ethical terms (moral hazard etc), such a move is warranted due to the sheer scale of deception and concealment of the facts of the Anglo Irish Bank operations that have been exposed to-date and are still being exposed and that were not disclosed at the time of the September 2008 Guarantee or, indeed, at the time of the 2010 Troika 'Bailout'. In other words, the argument can and should be made that both the Guarantee and the Bailout involved Irish commitments to lenders and lenders agreements that were not reflective of the full informational disclosures by the Anglo Irish Bank and the INBS.

In moral terms and economic terms, Irish people have paid a huge price for the crisis - far more than their fair share, given the fact that in rescuing Irish banks, we have underwritten a rescue of private bondholders and banks across the EU, the US. Irish people are paying for the crisis with dramatically higher rates of suicide, destroyed families, lost or endangered family homes, decimated health care system, devastated pensions, underfunded education and childcare, and an economy that in per capita GDP terms has sustained the third biggest drop across all Euro area countries. A large share of these costs is attributable to EU and ECB decision to force Irish Government to accept full losses in the Anglo Irish Bank and INBS - two rogue banking institutions that were not systemic to Ireland - which itself was predicated on incomplete information and misleading information being supplied to the Irish authorities at the time of decision making.

Furthermore, it is my opinion that the legacy of the Anglo and INBS - embodied in the continued process of disposal of the residual bonds on the insistence of the EU and ECB - is toxic to the democratic institutions of Ireland, from the point of view of the future. As long as Irish political elites are forced to deal with the legacy of the bonds disposals, there will remain an incentive for the Irish establishment to stay mute on the issues of systemic breaches in regulatory, supervisory and legal frameworks around the operations of the two rogue institutions. In return, official refusal to deal with the legacy fuels public mistrust of the core democratic institutions of the State, increasing the appeal of the extreme ideologies and political positions. 

The legacy of Anglo and INBS is so toxic that it prevents a rational, informed discovery of facts and debate of these facts as relating to the regulatory and supervisory breaches within Irish financial system. The only way we can functionally deal with this malfunctioning of the state systems is if the European authorities allow Ireland to move beyond the cost of carrying the repayments accruing from these liabilities on the State balance sheet. Only after shedding the immediate burden of having to finance their legacy can we, as a nation, move to the stage of addressing deeper, more structural problems exposed by the crisis.

Note: Details of overcharging sharp practices at Anglo Irish Bank that allegedly continued into IBRC and Nama are discussed here: Details of Mr. Morrissey letter quoted in the Dail (Irish parliament) are available here: Details of the affidavit filed by Mr. Declan Ganley with Irish authorities concerning overcharging allegations are available here: Details on evidence of Nama value destruction and other systemic problems are covered here: