09/09/2015: Tom Browne – Former Director, Anglo Irish Bank

AN COMHCHOISTE FIOSRÚCHÁIN I DTAOBH NA GÉARCHÉIME BAINCÉIREACHTA

JOINT COMMITTEE OF INQUIRY INTO THE BANKING CRISIS

The Committee met at 09.30 a.m.

MEMBERS PRESENT:

Deputy Pearse Doherty,	Senator Sean D. Barrett,
Deputy Joe Higgins,	Senator Michael D’Arcy,
Deputy Michael McGrath,	Senator Marc MacSharry,
Deputy Eoghan Murphy,	Senator Susan O’Keeffe.
Deputy Kieran O’Donnell,
Deputy John Paul Phelan,

DEPUTY CIARÁN LYNCH IN THE CHAIR.

 

Anglo Irish Bank – Mr. Tom Browne

Chairman

The Committee of Inquiry into the Banking Crisis is now resuming in public session. Can I ask members and those in the public Gallery to ensure that their mobile devices are switched off? Our final hearing of this evening is with Mr. Tom Browne, former director of Anglo Irish Bank. Mr. Browne was a director of Anglo from 2004 to November 2007. He joined Anglo in 1990 and was a member of the Dublin lending division from 1990 to 2000. He retired from Anglo in November 2007 and stepped down from the board at the same time. Mr. Browne, you are very welcome before the committee this evening and thank you for your co-operation in being here.	1892
Before hearing from the witness, I wish to advise the witness that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to this committee. If you are directed by the Chairman to cease giving evidence in relation to a particular matter and you continue to do so, you are entitled thereafter only to a qualified privilege in respect of your evidence. You’re directed that only evidence connected with the subject matter of these proceedings is to be given. I would remind members and those present that there are currently criminal proceedings ongoing and further criminal proceedings are scheduled during the lifetime of this inquiry which overlap with the subject matter of the inquiry. Therefore, the utmost caution should be taken not to prejudice those proceedings.	1893
Members of the public are reminded that photography is prohibited in the committee room. To assist the smooth running of the inquiry, we will display certain documents on the screens here in the committee room. For those sitting in the Gallery, these documents will be displayed on the screens to your left and right. Members of the public and journalists are reminded that these documents are confidential and they should not publish any of the documents so displayed.	1894
The witness has been directed to attend this meeting of the Joint Committee of Inquiry into the Banking Crisis. You have been furnished with booklets of core documents. These are before the committee and will be relied upon in questioning and form part of the evidence of the inquiry. So, with that said, if I can now ask the clerk to administer the oath to Mr. Browne, please.	1895

The following witness was sworn in by the Clerk to the Committee:

Mr. Tom Browne, former director, Anglo Irish Bank.

Chairman

Okay. So, welcome again, Mr. Browne and if I can invite you to make your opening remarks to the committee, please.

1897

Mr. Tom Browne

Thank you, Chairman. Good evening, ladies and gentlemen. I have been a career banker, starting with AIB in 1979 where I worked in various branch banking and head office departments. In 1990, I joined Anglo Irish Bank as lending manager in its Dublin branch. I was promoted to divisional head in 1997. In November 2000, I resigned from the bank to join the Devey Group as chief executive. The Devey Group was a Dublin-based health care, hospitality and property group with business operations in Ireland and Portugal. After approximately 11 months with the Devey Group, I was approached by the Anglo CEO, Seán FitzPatrick to rejoin the bank. I returned to the bank in February 2002 to establish a new division in the bank called the wealth management division. The wealth management division was an amalgam of various private banking operations in Dublin, London, Vienna, Geneva and the Isle of Man. In January 2004, I was appointed as an executive director to the board of the bank. In January 2005, I was appointed head of lending Ireland as part of significant management changes introduced by the newly appointed CEO, David Drumm. In April 2007, I advised Mr. Drumm and the chairman, Mr. FitzPatrick, of my intention to leave the bank with the announcement of my departure being made to the Stock Exchange on 4 September 2007 and set up a new business LeBruin, which is a corporate finance and debt advisory business now employing 20 people in Dublin, Galway and London. I welcome the opportunity to be of assistance to the inquiry.	1898
Given that I left the bank at this time, I can only be of limited assistance on what happened in the last quarter of 2007 and through 2008 when the bank experienced growing pressures and issues, which culminated in the Government guarantee and, ultimately, the nationalisation and State bailout of the bank. The inquiry has provided me with core documents. I have, however, not had any insight into the workings of the bank itself since I left in 2007. I will, again, however, do my best to be of assistance to you.	1899
When I left the bank in 2007, I firmly believed that the credit approval process, the loan review process, the ongoing reviews of credit policies and the developing risk function within the bank were sufficiently robust to provide early indications of problems in the loan book to the executive team, the board and to the Financial Regulator. Over the ten years to 2005, Anglo Irish Bank had transformed from being a small player in the Irish marketplace to becoming a serious player in terms of market share in chosen segments in Ireland, with a growing business in the UK and an emerging business in the US. This performance in Ireland was driven by a number of factors: a very active, long-standing client base, many of whom had become the leading players in the property development and investment sectors; very strong customer loyalty across the core client base, which ensured a high level of repeat business for the bank; and an economic environment with low interest rates and wholesale bank funding at unprecedented levels. The success of Anglo over the ten-year period to 2005 was reflected not just in the growth of the loan book, but also in year-on-year increases in earnings and a strong market rating recognised by reputable international agencies such as Oliver Wyman who, in 2007, named the bank as the best performing bank in the world over the previous five years.	1900
Due to this comparative success and to the prevailing economic conditions, competition in the mid-2000’s began to significantly intensify. This competition came from existing universal banks in Ireland and from emerging foreign lenders in the market. For example, AIB bank established what they called win-back teams to target former clients who’d moved their business elsewhere, or existing clients who were multi-banked. Emerging players, such as Bank of Scotland Ireland, ACC Bank and Ulster Bank, all competed very aggressively to wrest market share from existing banks, including Anglo. All of this led to an avalanche of credit in the marketplace. The timing of the Savills launch could not have been worse. Asset values rocketed, signs were emerging of a property bubble and, while the general consensus was that the market would have a soft landing, the emerging evidence indicated a serious potential problem.	1901
In early 2006, the Anglo board decided, on the basis of management advice, to change its lending policy reflecting the concerns we held about the acceleration in asset values and given the growing intensity of competition. A decision was taken that no new clients with development funding proposals would be entertained. The bank would exclusively deal with existing customers with a deal carrying an acceptable level of risk. This policy change became widely known in the marketplace and, indeed, some competitors played on this in their tactics to attract new development business. This policy change was Anglo’s attempt to curtail activity in this sector of the market, which, clearly, had begun to overheat. On reflection, the motivation for this policy change was entirely correct; however, the policy itself was seriously flawed because it did not go far enough. We continued to support our bigger existing clients who continued to be active in the market, which led to very large exposures to a concentrated number of clients. The lending proposals at that time all met the acceptable levels of risk. These proposals were from long-term, proven operators, each with a depth of expertise and capability to deliver successful projects time and again.	1902
Yet, with the benefit of hindsight, the failure to more forcibly implement the policy decision taken in early 2006 together with the shortcomings in the policy itself was a serious mistake. The consequences of this mistake became very clear when the property market in Ireland collapsed, resulting in very significant losses for the bank. The bank should not have defended its position with its biggest borrowers against the intensive competition in the market to the extent that it did. This defence led to unacceptable exposures concentrated on a relatively small number of customers, and no matter how professional and capable these customers were, the concentrated risk profile which resulted from this defence was to put the bank’s loan book at an unacceptable risk.	1903
Regarding the funding of the bank during this period, I did not experience that funding was under pressure prior to my departure from the bank. Through the early part of 2007, wholesale corporate and retail funding had held up well and the performance of the bank in attracting new funding was very good. There was no indication of stress. However, the pressure which emerged ultimately, post the Northern Rock issue, demonstrated that the funding base was not sufficiently wide, deep or stable to underpin the scale of the loan book. It also since emerged that at the time of my departure from the bank, Seán Quinn had a sizeable position in the bank through CFDs, contracts for difference. I was not made aware of this, although other board directors of the bank were. Although Seán Quinn’s CFD position would go on to cause difficulties for the bank, it would not, however, be appropriate for me to make any further comment on this matter because of ongoing legal proceedings.	1904
When I left Anglo, I genuinely believed that the bank was solvent and liquid. Indeed, a thought that a liquidity or solvency issue would emerge was alien to me. I did not see a threat to the long-term viability of the bank as I left the bank in 2007. I was a senior executive and an executive director of Anglo until 2007. Given what ultimately happened and the consequent impact on so many people, staff, customers, shareholders and the State, I deeply regret my own role in the building of the loan book to what became an unsustainable, overly concentrated scale. Thank you.	1905

Chairman

Thank you very much, Mr. Browne, for your opening remarks.

1906

Senator Susan O’Keeffe

Could we have clarification as to when Mr. Browne, exactly, left the bank?

1907

Mr. Tom Browne

My announcement was on 4 September 2007 to the Stock Exchange, and I physically departed out of the bank, probably, over the following four to five weeks.

1908

Senator Susan O’Keeffe

Thank you.

1909

Chairman

Thank you. Deputy Murphy.

1910

Deputy Eoghan Murphy

Thank you, Chairman, and thank you, Mr. Browne. You’re very welcome.

1911

Mr. Tom Browne

Thank you.

1912

Deputy Eoghan Murphy

I’d like to begin with the performance of the board, if I may. There was a board review undertaken by external consultants in 2003 and this review noted that some directors felt that the board pack “fails to ignite debate on important issues”. The report also notes that many directors expressed a “frustrating need for more debate on strategic issues”. When we come to the Nyberg report in 2011, when speaking about Anglo, it says, “There is little evidence that board directors at the time were active in challenging the bank’s approach or its pace of lending growth”. And, again, many of these observations were also reflected in a board evaluation that was carried out in November-December 2007. Do you agree, or not, with these observations?

1913

Mr. Tom Browne

Again, the first report, obviously, would have been carried out before I became a board member. I didn’t become a board member until early 2004.

1914

Deputy Eoghan Murphy

But, would that have been your impression of the board when you arrived?

1915

Mr. Tom Browne

No, it wouldn’t have been.

1916

Deputy Eoghan Murphy

“Fails to ignite debate on important issues …many directors expressed a frustrating need for more debate on strategic issues.”

1917

Mr. Tom Browne

I would have always seen the board as a very open, transparent gathering. I never felt, over the couple of years that I was there, that there was any fear of any of the non-executive directors asking any hard questions in regard to any matter pertaining to the business of the bank.

1918

Deputy Eoghan Murphy

But, do you think that the level of debate and challenge to management of the board was sufficient then from the non-executive directors?

1919

Mr. Tom Browne

Again, you know, as I said, the atmosphere of the board is very much an open, transparent process, and I never felt that any of the non-executive directors were afraid to actually, kind of, ask any far-reaching questions in regard to any aspect of business.

1920

Deputy Eoghan Murphy

So, when you came onto the board, though, was there any reference made back to this external consultants review from 2003 on the strategic management committee, was any discussion of how you might improve the board packs, improve debate at the board level?

1921

Mr. Tom Browne

Well, the board packs were being improved the whole time in terms of the level of information that was being given, so there was continuously upgrading of all the information on an ongoing basis from various aspects of the business. And, again, going back to my point, I never felt there was anything but a very transparent, open environment in terms of discussion around any issue relating to the activities of the bank during my period on the board.

1922

Deputy Eoghan Murphy

Okay. When Mike Aynsley was before us, he said that the committee structures was not as effective as they could have been, and he was aware that a board within a board existed. Can you comment on this in a general way, please?

1923

Mr. Tom Browne

Can you just clarify … what do you mean by that?

1924

Deputy Eoghan Murphy

Mike Aynsley talked about this idea of a board within a board existing at Anglo.

1925

Mr. Tom Browne

Again, you know, during my period of time on the board, I never got a sense that there was anything but a very transparent, open process around the board table, and I wouldn’t have got a feel … I wouldn’t have got a sense that there was a, kind of, a board within a board during my period of time there.

1926

Deputy Eoghan Murphy

Okay. The Nyberg report also talked about Anglo having insufficient checks and balances – “Traditional risk evaluation procedures and risk mitigants were not implemented in practice”, and that governance also “fell short of best practice”. What do you say to that? Do you agree with that?

1927

Mr. Tom Browne

Again, if you go back to the risk function in terms of how the risk function evolved over the years as the bank grew, I would have felt the risk function was very much on top of its game in terms of actually, kind of, being on top of the loan book. The bank was growing, you know, in three jurisdictions – Ireland, the UK and in America – and the risk function was staffed up by high-quality people, from within and new hires from other banks, so I would … Deputy, I would have always felt that the risk function, in particular, was … you know, it … it was growing in tandem with the bank. You know, the management structure they put in in regard to watch lists where the … you know, every manager had his watch-list case, which was actively managed by the managers … I would have always felt the risk function was very much on top of their game in terms of management of the overriding risk in the bank.

1928

Deputy Eoghan Murphy

So is Nyberg incorrect when he says that governance fell short of best practice in Anglo Irish Bank?

1929

Mr. Tom Browne

You know, again, I’d ask the question, “What does that actually … you know, what does he mean there?” You know, in what context is he saying the governance … you know.

1930

Deputy Eoghan Murphy

Have you read the Nyberg report?

1931

Mr. Tom Browne

I haven’t read the Nyberg report.

1932

Deputy Eoghan Murphy

Okay. Would you have a … okay, if you haven’t read it, I’ll move on from that. If you could, just briefly describe to me the corporate culture of the bank during your period on the board.

1933

Mr. Tom Browne

The corporate culture of the bank was very much … you know, it was a very inclusive bank. It was a, you know, … it was a very from the, kind of, top-down in terms of, the bank was very much on the one-way street in terms of what it was doing. It was very focused in terms of what it actually … it did. You know, the board was very aware of, actually, kind of … the actual … the issues around the ongoing activities of the bank, no matter what area of the bank, and any … and there was always encouragement to actually … to flag any issue of concern to the board early, and that was very much the mindset, you know, within … across the board table, that if there was a concern, if there was an issue, bring it up earlier and make the board aware of it.

1934

Deputy Eoghan Murphy

How often would the board have social occasions, a dinner, for example, where it would bring in someone from outside of the bank to engage with them, maybe make presentations in an informal way? We have heard here before about a dinner at Heritage House, at which the former Taoiseach attended. Those kinds of engagements … were you party to any of those types of dinners with the bank engaging with people from outside of the bank?

1935

Mr. Tom Browne

Yes, like, you know, there would have been one or two occasions every year. Somebody from, you know, the industry expert or, you know, from financial markets would have been brought to a, you know, a luncheon or a dinner after a board meeting and would have given their view in terms of the relevant topic of expertise. So that was kind of … that was something that happened on a regular enough basis.

1936

Deputy Eoghan Murphy

The purpose of those occasions was to hear from the outside experts—–

1937

Mr. Tom Browne

Yes, exactly.

1938

Deputy Eoghan Murphy

—–to speak to the board.

1939

Mr. Tom Browne

Yes, exactly, to give their view in terms of, you know, whether it was the property market or whether it was the financial markets, you know, in terms of actually giving their view of, kind of, of something that the bank felt was a relevant topic.

1940

Deputy Eoghan Murphy

Were you ever at a dinner or a luncheon where a politician attended?

1941

Mr. Tom Browne

No, I don’t remember. Yes, I don’t because, again, that one you referred to happened after I left the bank.

1942

Deputy Eoghan Murphy

Okay.

1943

Mr. Tom Browne

You know, we … for example, there was … you know, there was, I think, a couple of lunches where the Financial Regulator attended it. You know, I remember that one, okay. That was back in 2006, maybe.

1944

Deputy Eoghan Murphy

Was that a lunch or a dinner, do you remember?

1945

Mr. Tom Browne

I think it was a lunch, Deputy.

1946

Deputy Eoghan Murphy

And the purpose would have been to hear from the Financial Regulator about—–

1947

Mr. Tom Browne

Yes, exactly, how … you know, because what was, kind a, going on in terms of actually the whole regulatory environment around Europe and locally in terms of the impact it was going to have.

1948

Deputy Eoghan Murphy

Okay.

1949

Mr. Tom Browne

I think that was … I think, John Hurley was the man—–

1950

Deputy Eoghan Murphy

Okay.

1951

Mr. Tom Browne

—–at the time.

1952

Deputy Eoghan Murphy

Okay. Moving on from that to your role as managing director for lending, Ireland, can you tell me a bit about the lending culture under your stewardship because Mike Aynsley also told the committee about a story that was related to him about an auction as a way of illustrating the culture and the lending practices in the bank prior to the crisis? This is what Mike Aynsley said to us, and he is talking about someone speaking to him about an auction:	1953
And [the person] said, “I don’t know how they found out about it but I was at an auction one morning and a fellow came up and he handed me an envelope, and it was an Anglo Irish Bank envelope, and I opened it up, and there was a cheque inside, which represented slightly more than what the deposit would be and it says … a note attached saying, ‘Just in case you need the deposit’.”. So, you know, this is the mindset at the time. It was to go out there at all costs …	1954
Do you recognise that?	1955

Mr. Tom Browne

I would absolutely refute that story. That would never have happened, in my view. I’ll give you another example of an auction that I attended. In early 2006, when the bank had brought its new policy in place, I attended an auction on a property, which was guiding somewhere in the region of €10 million, in terms of its guide price, and it sold for something in excess of €30-odd million at the time, and I remember coming back to the office and requesting my secretary to get all the lenders into the room because this was, kind a, further justification of the change of policy that we had just introduced, that the market had gone out of control. You know, people were way … were paying way over the odds based on indicative pricing for assets, and that’s the other side of the story where the bank was at in early 2006.

1956

Deputy Eoghan Murphy

Okay, well, let’s look at this change in policy. In the core booklets, in Vol. 1, page 121, is a map of Ireland. It’s from a presentation from lending Ireland of 30 April 2007. You’ve seen this report in the booklets.

1957

Mr. Tom Browne

Yes, yes.

1958

Deputy Eoghan Murphy

Yes, so that would have been compiled and put together while you were—–

1959

Mr. Tom Browne

Yes, it was done in April 2007, yes.

1960

Deputy Eoghan Murphy

So you were involved in that.

1961

Mr. Tom Browne

Yes, that would have been … that would have been … that would have been of the new information that would have been developed over the couple of years.

1962

Deputy Eoghan Murphy

There’s a map here on page 121 and it is, “Total Drawn Land Balances – €5.29bn Loans by Location as at 30/04/07”, and it is up on the monitor there in front of you – €2.7 billion in Dublin, a third of a billion in Meath, a quarter of a billion in Galway, a half a billion in Cork, and it is showing, for each county, the exposures. So was this map presented as a positive to the bank, to the board, to the directors? What was the purpose of this?

1963

Mr. Tom Browne

The purpose of this was to actually show the … exactly where the exposures were in terms of land balance. Land was always, you know, the key issue of concern in terms of actually … because if there was any correction in the market, your land values were the ones that were immediately going to be dramatically affected.

1964

Deputy Eoghan Murphy

Okay.

1965

Mr. Tom Browne

And there was three elements in terms of … you know, you had your unzoned land, your zoned land and land with planning permission. Your real risk category was your unzoned land because, you know, that was the one that, kind of, if markets had continued to actually … had deteriorated, the value in regard to that type of land would eliminate overnight. So this, the purpose of this presentation, was to show the exposure, kind of, on a geographical basis.

1966

Deputy Eoghan Murphy

So what was the point or what was the goal of lending Ireland at this point in time in relation to these figures? To reduce them, to increase them, to—–

1967

Mr. Tom Browne

No, no. The goal was, again, based on the new lending policy that was introduced in 2006, which was very much to curtail the activity in this regard. As I said in my opening statement, we could see from early 2006 that the market was getting seriously overheated.

1968

Deputy Eoghan Murphy

But if you changed the policy in 2006, why did … and, again, your internal report shows this, that development lending in Ireland accounted for 30.5% of total lending and that it increased by 50% in the previous 12 months. This is in the report of April ‘07. If the policy changed in ‘06, how could lending in Ireland increase by 50% in the following 12 months?

1969

Mr. Tom Browne

As … again, as I said in my opening statement, is that we continued to support some of our bigger clients who were still remaining very active and that was the mistake that we made, that we continue to support a lot of these bigger clients in terms of the projects that they brought to the bank, and I think that was the mistake, looking back, that we made.

1970

Deputy Eoghan Murphy

But 50% is … I mean, if you recognised something in 2006 and the policy is to try and pull back – I understand the caveat that you put in there – but then to see it still increase by 50% in a 12-month period.

1971

Mr. Tom Browne

Well, I think it is a reflection of the fact where asset values were going. You know, again, going back to my point about, you know, we had a very active, you know, client base, they were the biggest players in the market and, unfortunately, we continued to actually support those players when we should have actually probably curtailed the level of lending to the bigger players in the market.

1972

Deputy Eoghan Murphy

So that was a mistake.

1973

Mr. Tom Browne

Absolutely.

1974

Deputy Eoghan Murphy

Okay. And just then to note that from September 2004 to September 2007 Irish lending grew by 284% – so that’s €13 billion to almost €38 billion – and this was on loans advanced … It was on loans advanced during this period that Anglo took its heaviest losses and you were MD of lending for most of this period, so what do you say to that?

1975

Mr. Tom Browne

Again, going back to the … you know, again, the franchise … you know, the franchise over those number of years was growing in terms of what … it just wasn’t property lending. We’d attempted to, kind of, broaden the base in terms of cashflow lending, M and A-type lending, corporate … more corporate lending. So we’d broadened the base over those number of years. Again, going back to the point I made earlier on, we had a very active client base. We had a very high level of repeat business.

1976

Deputy Eoghan Murphy

Sorry, how did you broaden the base? Excuse me.

1977

Mr. Tom Browne

How did we broaden?

1978

Deputy Eoghan Murphy

Yes.

1979

Mr. Tom Browne

We were trying to move away from just being purely, you know, dominated by actually property lending. We were trying to move into other areas of activity in terms of——

1980

Deputy Eoghan Murphy

What kind … what areas?

1981

Mr. Tom Browne

Cashflow lending.

1982

Deputy Eoghan Murphy

Okay.

1983

Mr. Tom Browne

You know, mergers and acquisitions—–

1984

Deputy Eoghan Murphy

Okay.

1985

Mr. Tom Browne

—–management buy-ins, management buyouts. So we were trying to actually, kind of, reduce the over-reliance on property lending.

1986

Deputy Eoghan Murphy

And what was your view of 100% lending?

1987

Mr. Tom Browne

Sorry?

1988

Deputy Eoghan Murphy

What was your view of 100% lending within the bank?

1989

Mr. Tom Browne

Well—–

1990

Deputy Eoghan Murphy

Could you intervene in a process, in a lending process, to make sure that a developer, a borrower, would get 100% financing?

1991

Mr. Tom Browne

No, because, you know, that … you know, that was, you know, the high-risk area, if you were giving 100% lending on development-type stuff you were … you know, that was huge risk you were taking at … you know, at that time, you know.

1992

Deputy Eoghan Murphy

So you’re familiar with the Applewood development in Swords?

1993

Mr. Tom Browne

Applewood in Swords?

1994

Deputy Eoghan Murphy

Yes.

1995

Mr. Tom Browne

Yes.

1996

Deputy Eoghan Murphy

Were you involved in securing that loan?

1997

Mr. Tom Browne

That loan was being done back in the … probably sometime in—–

1998

Chairman

Just speak in the general if you can there, Deputy, now, okay.

1999

Deputy Eoghan Murphy

Okay, yes.

2000

Mr. Tom Browne

Sorry?

2001

Chairman

I’m just—–

2002

Deputy Eoghan Murphy

Just … sorry—–

2003

Chairman

Just to be general.

2004

Deputy Eoghan Murphy

Yes.

2005

Chairman

Mr. Browne.

2006

Mr. Tom Browne

Sorry, yes, I was aware of that project, yes.

2007

Deputy Eoghan Murphy

Okay. And just in terms of the finance for that project or finance for projects at the time, in terms of 100% lending being done by the banks in terms of providing all of the money that was needed to secure the site, was that a practice in the bank?

2008

Mr. Tom Browne

No, it was a unique situation. That would have been a very much one-off situation.

2009

Deputy Eoghan Murphy

A one-off situation?

2010

Mr. Tom Browne

Yes.

2011

Deputy Eoghan Murphy

Okay. And you were involved with that.

2012

Mr. Tom Browne

Yes.

2013

Deputy Eoghan Murphy

Okay. So how can such a situation arise in the bank with such strict lending policies as you outlined in your written statement?

2014

Mr. Tom Browne

Again, I think, if my memory serves, my … that project would have been done … that project could have been started probably … would that have been back in the ‘90s?

2015

Deputy Eoghan Murphy

I’m not sure about the start of the project.

2016

Mr. Tom Browne

Yes, I think it could have been, you know. But, again, I think it was a very unique situation where the bank decided to actually … because of the actual promoter that was involved there, we decided, you know, to take that position and get involved in that scheme at that time, but it was a very much a one-off type situation.

2017

Deputy Eoghan Murphy

And that decision was made by the board of the bank?

2018

Mr. Tom Browne

By the credit committee of the bank.

2019

Deputy Eoghan Murphy

By the credit committee, not by the board?

2020

Mr. Tom Browne

Yes. No, it … it would have been signed off by a non-executive director—–

2021

Deputy Eoghan Murphy

Okay.

2022

Mr. Tom Browne

—–under a noting policy.

2023

Deputy Eoghan Murphy

Okay. And what about the use of personal guarantees in the bank?

2024

Mr. Tom Browne

Again, the bank, kind of, always, you know, looked for personal guarantees. It was the one key … one of the key tenets in terms of the way the bank did its business – always looked for personal guarantees from its borrowers.

2025

Deputy Eoghan Murphy

Okay.

2026

Mr. Tom Browne

And in many cases, you know, people weren’t prepared to give personal guarantees, and we weren’t prepared to do the loan.

2027

Deputy Eoghan Murphy

Okay. But there was an internal inspection report … or, sorry, an inspection report done by the Financial Regulator in 2007 and one of the issues it highlighted was that the bank didn’t have a mechanism for formally monitoring the overall extent of the loan book subject to personal guarantees. Why didn’t it?

2028

Mr. Tom Browne

Well, every loan would have been subject to personal guarantee?

2029

Deputy Eoghan Murphy

Okay. Every loan would have been—–

2030

Mr. Tom Browne

Yes—–

2031

Deputy Eoghan Murphy

—–subject to personal guarantee?

2032

Mr. Tom Browne

—–because it was either … it was either borrowed on a personal basis—–

2033

Deputy Eoghan Murphy

Right.

2034

Mr. Tom Browne

—–or if there was a company situation, a personal guarantee would have been sought.

2035

Deputy Eoghan Murphy

I see. So you didn’t need to have a mechanism because it applied to every single loan.

2036

Mr. Tom Browne

No, because it applied … it was … and it was one of the key standards that Anglo was recognised for, that they always looked for personal guarantees.

2037

Deputy Eoghan Murphy

Was that a mistake?

2038

Mr. Tom Browne

No, because the logic behind it was, is that the reason why you were looking for personal guarantees, that if you got into a difficulty with the client, right, you had leverage over the client in terms of the personal guarantee.

2039

Deputy Eoghan Murphy

Okay.

2040

Chairman

I’ll give you another five minutes but I just want to pick up on this point, Mr. Browne. There were propositions that people who gave personal guarantees gave personal guarantees to many financial institutions and when NAMA was auditing its loan book, when it took it on board, that was certainly something that was visible in the NAMA. So, while you were taking personal guarantees, were you also examining to see if the person who was giving you a personal guarantee hadn’t already given a personal guarantee to another institution?

2041

Mr. Tom Browne

Yes. And one of the key things we would have done with our bigger clients in the latter years would have been we would have looked for, kind of, full transparency in their total bank obligations.

2042

Chairman

And did you discover or uncover situations where a personal guarantee was already in place with another institution and you did not issue a loan?

2043

Mr. Tom Browne

I can’t remember that, Chairman, happening. Again, you would have been with, you know, with our bigger clients, the top ten, top 20. We would have, you know, in the latter years been looking at, kind of, their total banking obligations across all their banks.

2044

Chairman

Yes.

2045

Mr. Tom Browne

And we … you know, in terms of actually … it was a standard … it was very much standard … par for the course that we would look for personal guarantees.

2046

Chairman

Okay. Would you say that the examination of the exposure in personal guarantees in regard to cross-guaranteeing at a personal level was robust enough given where NAMA found themselves when they went and looked at the loan books?

2047

Mr. Tom Browne

Again, going back to my time there … you know, to picture a moment in time in terms of where, you know, people’s, kind of … you know, the value of the personal guarantees, you know, back in 2005, 2006, 2007, you know, was significantly, you know, I suppose, greater than their debt obligations.

2048

Chairman

Okay.

2049

Mr. Tom Browne

Given where the balance … their balance sheets would have at that moment in time, Chairman—–

2050

Chairman

Okay, that’s not the question I asked you, Mr. Browne. The question is: given what came out in the wash when the loans were transferred into NAMA, and the level of exposure on cross-exposure on personal guarantees, do you think that the … that the risk analysis of personal guarantees was sufficient enough in Anglo?

2051

Mr. Tom Browne

I think, again, it goes back to the case-by-case basis.

2052

Chairman

I’m not … look, we know the paperwork transferred—–

2053

Mr. Tom Browne

Yes.

2054

Chairman

—–we know what the details of that show. Do you believe, given what NAMA then uncovered when they started looking at each of the books and the personal guarantees that were actually given, that Anglo’s risk analysis of personal guarantees … you say it was a … it was one of your performing criteria, but when it was washed out and what was seen, was it … do you now consider it to be robust enough or not?

2055

Mr. Tom Browne

Again, going back to my time there, Chairman, I would have thought, you know, we were looking at the … you know, the cases on a case-by-case basis. We would have satisfied ourselves in regard to our position in regard to the loan and the personal guarantee.

2056

Chairman

Okay. I don’t want to be repeating myself, Mr. Browne, but that’s not the question I’m asking you. I’m asking you now … we know what happened afterwards. Do you consider it now … you’re going back to then—–

2057

Mr. Tom Browne

Yes.

2058

Chairman

—–and that you think that everything was fine then—–

2059

Mr. Tom Browne

Yes.

2060

Chairman

—–and maybe it’s fine now even in that regard. That’s what was the … the visible to you then. Given what’s visible to you now, do you consider that the risk analysis of personal guarantees was robust enough?

2061

Mr. Tom Browne

Well, given what happened subsequent to that time, Chairman, you know, it would be clear to say that it wasn’t robust enough, you know.

2062

Chairman

Okay. Thank you. Deputy Murphy.

2063

Deputy Eoghan Murphy

Thanks, Chair. Mr. Browne, looking then … continuing on this theme, and enforcement of security, NAMA reported that a downward adjustment of €477 million in aggregate was required to the value of the loans acquired from the participating institutions due to the difficulties with enforcement of security, and Anglo accounted for 57% of this total, €273 million. So can you explain why the discount applying to Anglo’s loans in respect of difficulties with security was so high?

2064

Mr. Tom Browne

Again, you know, the process was that we would have engaged a solicitor, a firm of solicitors to put our security in place. That was always farmed out. We had a panel of … two panels of solicitors, depending on the size of the deal. And a solicitor would be responsible for putting the security in place. So, you know, when you … you know … so on a case-by-case basis, there was individual legal firms appointed to make sure that the security was perfected. And it was the responsibility of the lending team and the banking administration team to ensure that the security was put in place. But, ultimately, the responsibility was actually … was the role of the legal agent appointed by the bank in terms of perfection of security. And, again, you know, I don’t … it seems … that when you say that figure, it seemed extraordinary high. You know, again it depends on, kind of, the individual aspects of each case. But it seems remarkably high to me, because again the process was very much, you farmed out your legal perfection work to an appointed panel of solicitors.

2065

Deputy Eoghan Murphy

Okay. So you don’t think this is indicative of a lax approach to taking security—–

2066

Mr. Tom Browne

No, because, again—–

2067

Deputy Eoghan Murphy

—–by Anglo?

2068

Mr. Tom Browne

—–because the primary responsibility in regard to the taking of security was with the actual legal firm that was appointed—–

2069

Deputy Eoghan Murphy

Okay.

2070

Mr. Tom Browne

—–to perfect it on behalf of the bank. So in that case then, you know, in … based on your figures, there’s a huge issue in regard to the quality of the work that was undertaken by those legal firms. So, you know, it was very much part and parcel of the actual process that the security was perfected by an appointed law firm acting on behalf of the bank. So that work then was, obviously, not done correctly by the individual law firm. And there should be, you know, there should be a … you know, initial questions asked of those law firms in terms of why didn’t they do their job properly.

2071

Deputy Eoghan Murphy

Okay. And just—–

2072

Chairman

Thank you very much. Finally.

2073

Deputy Eoghan Murphy

Final question, sorry. And it’s just in relation to discussions at the board in relation to why the NTMA wasn’t placing deposits with the bank. What was your view … I mean, we have a view from Brendan McDonagh from the NTMA that they were always sceptical about the business model of Anglo and that the bank couldn’t get deposits from the NTMA. And then, eventually, it did and the NTMA didn’t want to keep those deposits with the bank but it had to because of a direction from the Department of Finance. So did the board discuss this and what was the view of the board?

2074

Mr. Tom Browne

I don’t remember it ever being discussed at the board while I was there. My answer to that would be, you know, over the years that I was there the bank had a tremendous track record in terms of its … its actual liquidity and fundraising. It always used to amaze me when you looked at the list of corporate depositors, you know, you had international firms across Europe, you know, with €700 million, €800 million, €900 million on deposit. So the bank was very successful in terms of growing its deposit base under a number of strands over many many years but that issue, you know, in terms of the NTMA, I don’t remember it ever being coming up at the board meeting.

2075

Deputy Eoghan Murphy

Or outside of the board in your role as MD of lending Ireland.

2076

Mr. Tom Browne

Well, I wouldn’t … it wouldn’t have been an aspect of—–

2077

Deputy Eoghan Murphy

On the strategic management committee?

2078

Mr. Tom Browne

It wouldn’t have been an aspect that I would’ve been looking at.

2079

Deputy Eoghan Murphy

Okay, thank you. Thank you, Chair.

2080

Chairman

Thank you very much. Deputy Doherty.

2081

Deputy Pearse Doherty

Can I just get clarification on the personal guarantees? You say that the bank always took personal guarantees from individuals. What was the situation when a developer … when the loan was being applied in the name of the company, as opposed to the person?

2082

Mr. Tom Browne

Yeah, so if it was being … if the loan was being drawn down in the name of a company, the client or the person would have had to sign a personal guarantee to support that loan.

2083

Deputy Pearse Doherty

So it’s the same thing.

2084

Mr. Tom Browne

Yes, so if you borrow personally you’re on the line—–

2085

Deputy Pearse Doherty

Yes.

2086

Mr. Tom Browne

—– you’ve got personal liability. If you borrow in a company you’ll be signing a personal guarantee in support of the loan.

2087

Deputy Pearse Doherty

So, their house or whatever their assets, their personal assets—–

2088

Mr. Tom Browne

Would have been on the liability.

2089

Deputy Pearse Doherty

And you say that this happened on all occasions.

2090

Mr. Tom Browne

That, sorry … that was very much part and parcel of the actual process in Anglo, the personal guarantees were actually looked for.

2091

Deputy Pearse Doherty

But you testified that in all loans that this was the case.

2092

Mr. Tom Browne

Sorry, in all loans it would have been looked for and that was part and parcel of actually kind of the process. Now—–

2093

Deputy Pearse Doherty

The reason I ask is, Michael O’Flynn has come before this inquiry, which … where he had, I think, loans with a range of institutions, but 50% of them were with Anglo Irish Bank. And he has given evidence to say “I never issued personal guarantees to any lender in relation to the business”.

2094

Mr. Tom Browne

In that situation we obviously didn’t take personal guarantees.

2095

Deputy Pearse Doherty

So it wasn’t every loan.

2096

Mr. Tom Browne

No, sorry—–

2097

Deputy Pearse Doherty

Every loan wasn’t backed by a personal guarantee.

2098

Mr. Tom Browne

You know, maybe that was a very … too general a statement, but as a matter of form, right, we would have always looked for personal guarantees, and I—–

2099

Deputy Pearse Doherty

Of … of, for example, not wanting to individualise it, but are you suggesting that this case where we know – well, where it has been given in evidence – that there was no personal guarantee ever given, you are suggesting that a personal guarantee would have been asked for, is that what you are saying?

2100

Mr. Tom Browne

No, no, I’m not saying … again I, you know, again it depends on where that relationship started out from.

2101

Deputy Pearse Doherty

What was the policy? Just explain. You’re the head lender in Anglo Irish Bank.

2102

Mr. Tom Browne

The policy—–

2103

Deputy Pearse Doherty

Explain the policy because we’re … you told us there was personal guarantees in all loans, now there was not in all loans but they were always asked for, now you’re not—–

2104

Mr. Tom Browne

The policy very clearly was … your starting position … you’d be looking for personal guarantees on all loans.

2105

Deputy Pearse Doherty

So did you?

2106

Mr. Tom Browne

Sorry?

2107

Deputy Pearse Doherty

Did you look for it? Did you—–

2108

Mr. Tom Browne

Yes.

2109

Deputy Pearse Doherty

Okay, so in relation to this loan for example, you would’ve requested of O’Flynn Group for a personal guarantee.

2110

Mr. Tom Browne

And again, depending on where the relationship started out, it obviously wasn’t looked for at that … in regard to that case.

2111

Deputy Pearse Doherty

But you’re just after telling us that they was … they were looked for in all cases.

2112

Mr. Tom Browne

But the policy very clearly was, you would start out looking for a personal guarantee and then—–

2113

Deputy Pearse Doherty

Yes, and I asked you “And did you?” and you said “Yes”.

2114

Mr. Tom Browne

And in the … in the vast majority of cases the personal guarantees were signed.

2115

Deputy Pearse Doherty

So not in all cases.

2116

Mr. Tom Browne

In the vast majority of cases, yes.

2117

Deputy Pearse Doherty

Okay.

2118

Chairman

Without changing the subject, I just want to round something off on this and we’ll stop the clock a second. In just the general area of securitising loans, did you follow that up, this process, with law firms?

2119

Mr. Tom Browne

Yes.

2120

Chairman

Did you actually have a legal process for following—–

2121

Mr. Tom Browne

Yes.

2122

Chairman

—–up the securitisation?

2123

Mr. Tom Browne

So, the way it worked, Chairman, is that the … the law firm was appointed to put the security in place on behalf of the bank.

2124

Chairman

Okay, and maybe you could just explain to us in that regard when we had the transference into NAMA, the letters of undertaking that were required seemed to be a huge issue in terms of securitisation, the incompletion of legal work by banks and securitisation, and all the rest was a very, very … was a legacy issue that NAMA had to deal with quite quickly to get its, kind of, deeds and portfolios sorted out. How did Anglo perform in that regard?

2125

Mr. Tom Browne

Again, it would have been the responsibility of the individual lending manager.

2126

Chairman

No. I know well. I’m talking about the process when Anglo came in. How did they rate in compare to other institutions in having their legal undertakings completed when the portfolios were transferred into NAMA?

2127

Mr. Tom Browne

I don’t know. I’ve no visibility on that because, you know, I wasn’t involved in it. I wasn’t in the banking world at that stage, so I’ve no ability to answer that question.

2128

Chairman

Okay. Deputy Murphy, sorry, Deputy Doherty.

2129

Deputy Pearse Doherty

Well, I was just going to go on to that issue in terms of security and the perfection of security. And Deputy Murphy rightly outlined the €477 million, I think it was, from NAMA, but NAMA confirmed that that for the institution – the individual banks – was in the region of €2 billion. That’s how much loans that could not be perfected because of … or could not … had to be written off as a result of unperfected security, and the majority of them rested with your bank. We see on the core documents, Vol. 2, page 63 … we see an example of 12 files that was carried out. And of ten of those files, no letter from the bank’s solicitors confirming the security was complete is evident, that’s, 83%. These are loans above €6 million. It talks about the credit policy where draw-down shouldn’t happen unless it’s authorised in writing by a manager before the perfection of security, but we see that the draw-downs were taking place. And I think in the situation the number of draw-downs up to the time of the review for the 12 selected loans was 67. So, again, we are seeing, like, loans of €149 million which were drawn down with no solicitor’s letter on file. So, as a result of your credit policy, that would have had to be authorised by a manager. So, it’s not solely the responsibility of the solicitors.

2130

Mr. Tom Browne

No, that would like … sorry, ultimately, ultimately, the responsibility would come back to the individual portfolio manager dealing with those cases.

2131

Deputy Pearse Doherty

Yes, and ultimately you as head of lending would it be?

2132

Mr. Tom Browne

Yes, ultimately me, okay.

2133

Deputy Pearse Doherty

Yes.

2134

Mr. Tom Browne

So in those cases here, you look, kind of, in terms of the jurisdictions there. They were across jurisdictions—–

2135

Deputy Pearse Doherty

What do you mean “cross jurisdictions”?

2136

Mr. Tom Browne

Well, you have sterling loans, US dollar loans, right, so ultimately, right, the responsibility for the security being put in place lay at the foot of the portfolio manager and ultimately the directors of the division.

2137

Deputy Pearse Doherty

Yes, these are Dublin… just see the top of the paper … these are Dublin loans.

2138

Mr. Tom Browne

Yes, so therefore then, we would have been … we would have … somebody would have had to sign off, right, okay, on the draw-down of all that money, and in the draw-down form it would have been … it would have asked, “Has the security been perfected?”.

2139

Deputy Pearse Doherty

And you would have been told “No, it’s not”, and you still allowed for draw-downs, for example, of €149 million without any security being effected, £11 million sterling without security being effected, US $30 million, €23 million in another one, €18 million in another one, €14 million in another one, and so on. And that’s only ten out of the 12 loans that were inspected, 83%.

2140

Mr. Tom Browne

But again, you have to look behind each of the individual loans and see why … why was the loan drawn down. The security could have been perfected, but it may not have a letter on the file.

2141

Deputy Pearse Doherty

Well, given the fact that we know that €2 billion from the financial institutions that went into NAMA of loans that were issued, had to be written off basically – the security wasn’t perfected and the majority of them rested with your bank – do you not think that there was a serious issue here, which this audit was outlining to you?

2142

Mr. Tom Browne

Yes, and again, on the basis of this audit, right, action would have been taken to ensure that, you know, you got the letter on file from the solicitor. But, like, the reality of it is … is that whilst you may not have the letter on file, right, the security, would have been in place, and it would have been signed off by the respective authorised signatures that the security was in place.

2143

Deputy Pearse Doherty

But can I put it to you that the reality that we’re dealing with today is that, according to NAMA, €2 billion of loans issued by financial institutions, of which the majority of them rested … originated from your institution, could not be pursued because the security was not perfected? So, it’s not … it doesn’t seem to be the case that this was just a delay, that the letter was in the post or something that this … these loans had to be written off. People who got this money were not pursued as a result of this type of … managers authorising draw-downs of loans without perfection of security.

2144

Mr. Tom Browne

And again, I would say to you, on the basis of, you know, the responsibility there, right, in terms of perfection of the security was with the law firm that was actually—–

2145

Deputy Pearse Doherty

That’s fair enough, but is the responsibility not with you, as head of lending, not to issue the money before the perfection of security is there?

2146

Mr. Tom Browne

And again, right, in regard to all … you have to look behind all of these cases to see why, you know … there’s a reason behind why the loans were drawn down, right, without having the letter on file, right. And the follow up would have been, right, to actually, kind of, make sure that the security was put in place, and a letter in the file from the legal firm, you know, verifying the fact that the security had been put in place.

2147

Deputy Pearse Doherty

Do you believe that the security was put in place in all of these loans, despite what NAMA has told this committee?

2148

Mr. Tom Browne

Obviously, you know, on the basis of what NAMA saw after the event, right, there was loans of where the security wasn’t fully perfected.

2149

Deputy Pearse Doherty

Do you take any responsibility for that as head of lending?

2150

Mr. Tom Browne

You know, ultimately, it comes down in my … you know, when I was there for the period of time that I was there. But, like, you know, I was there up to, kind of, September 2007. What happened after, that I do not know.

2151

Deputy Pearse Doherty

Okay, and … but you take responsibility up until that period. Is that what you’re—–

2152

Mr. Tom Browne

Yes. No problem with that.

2153

Deputy Pearse Doherty

—–telling me? Can I ask you … it was mentioned in terms of the culture of lending within the bank and it was talked about in terms of the auction … evidence that we’ve had … you’ve mentioned that you haven’t read the Nyberg report, but have you readAnglo Republic?

2154

Mr. Tom Browne

Anglo Republic … which one was—–

2155

Deputy Pearse Doherty

Book by Simon Carswell.

2156

Mr. Tom Browne

I have read it, yes.

2157

Deputy Pearse Doherty

Okay. The opening chapter of that there deals with the biggest transaction in the history of the Irish property bubble, a transaction that totalled €1.165 billion. It suggests that the property that was purchased was purchased at 2 o’clock in the morning. A manager from Anglo landed with a bank draft for the purchaser … to the … for the purpose of the purchase of that property. Is that an accurate reflection of what was going on in Anglo – that Anglo was on call at 12 o’clock at night, landed down to the office where this auction – so-called auction – was taking place and produced a bank draft at 2 o’clock in the morning to allow this developer to buy the biggest valued asset in the history of the Irish property bubble?

2158

Mr. Tom Browne

What transaction are you referring to, Deputy?

2159

Deputy Pearse Doherty

Well, it’s in … it’s in the prologue of … it’s the opening chapter … it’s the opening words ofAnglo Republic. It’s the Jury Inn property and it was … the question is in terms of the … the … the … the culture—–

2160

Mr. Tom Browne

Yes.

2161

Deputy Pearse Doherty

—–is this the type of activity that was going on in Anglo?

2162

Mr. Tom Browne

No. I think that is an unfair reflection, you know. You know, there was a very clear culture in the bank, right, of a loan process that went from … you know, the team that actually originated the loan or the team who managed the exposure, they would actually look at the actual … the individual loan. They would decide whether they felt that loan was worth bringing to actually what we used to call our mini-credit committee meetings. The mini-credit committee meeting was a meeting amongst the lenders like in a room like this. There could be 20, 30 people who would actually … the loan would be presented, it would be debated amongst the actual … the lenders. If the consensus view was that the loan was a good loan, it would go on to a main credit forum in terms of, actually, for final sign off where non-lenders and risk would have been the final arbitrators of the individual loans. In some situations, you know, there would have been forums – gathered quickly – of senior people to decide whether a loan was actually one that was worth doing in terms of acceptable levels of risk, but the vast majority of, actually, loans would have gone through a very formal process of approval. As I say, from the team up to the mini-credit situation to the main credit situation and being signed off at that level.

2163

Deputy Pearse Doherty

But did we have … the question I am asking is, did we have – as is reflected in this book – at around 2 a.m., a senior lender from Anglo arrived at William Fry with a bank draft for €1.165 billion? Is that … was there—–

2164

Mr. Tom Browne

Well, before they ever got to that point, Deputy, right—–

2165

Deputy Pearse Doherty

Yes, there was a process.

2166

Mr. Tom Browne

—–there would have been a huge … for something like that, there would have been a massive amount of debate. It wasn’t someone rocking up with a cheque for that level at 12 o’clock at night. There would have been a massive level of discussion and debate in regard to the merits, demerits of actually doing the deal. So, you know, that – the way it’s portrayed – is actually kind of, you know, not the way it happens.

2167

Deputy Pearse Doherty

Okay, so, there would be an upper limit for—–

2168

Mr. Tom Browne

There would’ve been a huge amount of discussion around that. It wasn’t somebody kind of, as you say, rocking up at 12 o’clock at night to William Fry’s. There would have been a massive amount of discussion around an exposure such as that. And then, going back to my point, you know, there was a very formulaic approach from the ground up in terms of, actually, approval of loans. Every loan, you know, went up to credit committee every year for review and every loan was reviewed by risk – in the early days, four times a year, and in latter years, two times a year. And out of those review processes came what probably was the most important management tool, which was the actual watch list. The watch list was, you know, the individual loans on each portfolio that needed attention. The attention was decided by the risk people in terms of what action was … was to be taken in regard to, you know, correcting the situation that they weren’t happy with.

2169

Deputy Pearse Doherty

It all sounds absolutely fantastic and it sounds great, bar the small point that the bank cost the State €30 billion as a result of loans … the loan … the loans that were issued.

2170

Mr. Tom Browne

And again—–

2171

Deputy Pearse Doherty

It sounds very robust and—–

2172

Mr. Tom Browne

No, but, and again, Deputy, from the point of view of … actually, it was a very robust process, okay. You know, as I said earlier on, the mistake that was clearly made, right, in terms of, actually, the property development loans in particular, was that we did support, you know, probably our top 20 clients too robustly against intense competition and we got too big with those exposures. And I think they would have caused an awful lot of difficulty when the property market went into its nosedive.

2173

Deputy Pearse Doherty

We’ve seen … there’s figures in Vol. 1, on page 57, for 2008 but they reflect also a similar pattern in 2007 – and this is on page 57 of Vol. 1 – and it’s the exceptions to group policy lending credit policy. We’re seeing an average of about 25%. So, what of all your loans are exemptions … exceptions to your own policy?

2174

Mr. Tom Browne

Yes. That’s a very good question.

2175

Deputy Pearse Doherty

How do you stand over that as head of lending?

2176

Mr. Tom Browne

Yes, well, I think you have to look at the exceptions. Every exception has to be look … looks … looked at in terms of its materiality. An exception could be the following: if credit policy says that interest cover has to be 1.3 times, the lending manager brings a loan to credit committee and, say, the loan is €5 million and the interest cost is, say, at a rate of 5%, so that means the cost of funding that loan is €250,000. So, at 1.3 times, you need €325,000 of income to actually tick the box in terms of—–

2177

Deputy Pearse Doherty

Yes.

2178

Mr. Tom Browne

—–in terms of interest cover. But if the loan comes up and it only has 1.2 times of income, so it’s only got €300,000, it’ll be shown up on the actual … the actual credit application that this is an exception to credit committee. It’ll be debated whether it’ll, actually, should be done and in that situation it’s decided, for a whole host of reasons, why the credit would be signed off.

2179

Deputy Pearse Doherty

What—–

2180

Mr. Tom Browne

If I go back to your picture … your thing … your page 57, if you look at that, right, okay, you know, where from February ‘08, 26% went to 42%, right, okay, if you look at, kind of, the comment underneath it – “The percentage increase in exceptions for July is primarily due to lenders applying a 20% discount to security values.” Obviously, this is, you know, into 2008, you know, a year after I left the bank and obviously what the bank was doing at that stage, because asset values were under pressure, when the loans were going up for, actually, their annual review, the actual value of security was being written down to reflect the fact that the market was actually … asset values were actually on a downward spiral. And that’s where you’ve got the increase in that period of time. So, you have to look behind … there was an individual story behind every exception. And exceptions, you know, on the basis of … you have your lending policy, right, okay, but if it’s an exception to credit policy, it’s put up very clearly upfront, right, for a decision to be made whether you would actually want to approve the actual … the credit, if it’s outside policy. And that could be for a whole host of reasons. Like, it could be there’s other security that … cross-secured. There’s … the client could be a depositor of the bank. The client, you know, could be, you know, have another, kind of, relationship with the bank in terms of, actually, on the private banking side. So, there is a whole range of issues that could determine why you would actually, kind of, approve a loan—–

2181

Chairman

A final question, Deputy.

2182

Mr. Tom Browne

—–that was outside of credit policy.

2183

Deputy Pearse Doherty

Okay. We’ve heard testimony from … from others in the committee, including Professor Honohan, which talks about the damage was done, you know, in the period running up to 2006 … that period … that when you were going into 2008, it was too late. Can you explain to me – and that was … obviously … coincides with the period when you were head of lending of Anglo Irish Bank for the Irish division – can you explain to me how NAMA had to apply a 61% discount to loans that your bank and you, as head of lending, approved? How did you get it so wrong and … when we compare it to other banks which had haircuts but not as high as 61% applied to them?

2184

Mr. Tom Browne

I think … as I said in my opening statement, I think the big … the biggest issue looking back at it now is that we got very big with a very small number of clients who were the most active in the market at that time. We defended our position too strongly with these people and our exposures went to levels that were unacceptable and as a result of that then, you know, the haircuts that the bank, you know, obviously were forced to take because they were very big exposures with clients reflected in the fact of what happened when NAMA came into being. And, you know, I’ve openly admitted it here tonight that we did actually defend ourselves too strongly with a small, select group of clients—–

2185

Deputy Pearse Doherty

What does that mean – defend yourselves? Does that mean continue to give them money when you shouldn’t have given them money?

2186

Mr. Tom Browne

No, I think again looking back at every … all the loans at time look on the basis of … when you looked at them, they had acceptable risk but I think the biggest issue looking back there now is we didn’t cap out our exposures with some of these bigger clients and say that’s, you know, that’s as much as we can do and without … that’s the mistake that was made in hindsight.

2187

Chairman

I’ll let you back in again, Deputy, as we wrap up. I just want to kind of come into an area myself which is probably a summary where Deputy Doherty is at so I won’t drill back down to the detail. I’ll just take it at top level with you, Mr. Browne, which is with regards to the bank’s lending approach. What was your view of the lending policy procedures and prevailing culture? Was it the kind of … was it the norm as reflected in the wider banking sector or was it a very aggressive one or was it passive? How would you reflect upon that now?

2188

Mr. Tom Browne

I think the … as I said in my opening statement again, I think what the bank had developed over kind of the period ‘95 to 2005 was a very active client base, Chairman, where there was a very high level of repeat business from that client base. There was huge loyalty from that client base and we continued to support those clients probably too strongly into a period when the market was actually getting overheated.

2189

Chairman

But in cultural terms, coming back to Deputy Doherty’s earlier question that there was … the level of exceptions, could it be put forward or not that the question was “yes, we do have an exception policy and there’s a culture reflected in that and that’s why we have 25%, in that we have a different view of what exceptions are hence we have such a high level and that’s a cultural position in the bank”?

2190

Mr. Tom Browne

Again, I think you have to look behind. I think if you look at … if you talk about exceptions kind of in a very naked way, I think you have to look behind every individual loan—–

2191

Chairman

But there is a kind of a … but in every organisation whether you study it academically or exist in one, every organisation has a culture. This structure is … this committee has a culture—–

2192

Mr. Tom Browne

I think the word you’d use … Anglo was a very commercial organisation.

2193

Chairman

Okay.

2194

Mr. Tom Browne

That’s the word I would use, Chairman, and, you know, you actually, you took a view on each case, right, on its merits and if it was outside of exception, there was a, you know, there was a general sign-off of the credit based on a … you know, as I said as a collective forum at credit committee to say “yes, we’re happy with the risk”.

2195

Chairman

And coming on to the credit risk then and in your opinion, did you believe that the controls adopted by the bank were sufficiently robust?

2196

Mr. Tom Browne

Again, looking back on my time there right, I, you know, I never thought that the actual credit function … the risk function was anything but robust and independent in terms of the review.

2197

Chairman

So were you voicing any concerns at that time?

2198

Mr. Tom Browne

In terms of?

2199

Chairman

In terms of the credit risk controls? You weren’t articulating any concerns at that time, no?

2200

Mr. Tom Browne

Again, because again I would have felt that the actual risk function, the risk function, Chairman, was a very independent-minded function in terms of actually their view of whether the risk was acceptable to the bank or not.

2201

Chairman

All right. I’m going to … I’m referring to three different documents but I’m just going to bring up two pages as examples of them. One is regard … they’re all in Vol. 1. One deals with risk appetite, the other one’s minutes of risk and compliance meetings and the other one is an extract from the loan review summary. So in core book Vol. 1 there, I’m just bringing up on the screen … I think it’s page 97 if I can just have a look at it there … page 97. If we just to go to the bottom of that page there, Mr. Browne, it says:	2202
Residential development accounts for 67% of development overall. Exposure [of] zoned land without planning primarily related to the Bank’s Top 10 customer relationships with whom the Bank has a long and satisfactory track record [and] It was noted that the exposure to the unzoned land was not significant.	2203
And then I’ll just go on to page 101 in the same book and we might just leave this one on the screen then afterwards. If you go to 101, and it’s the second table down there where it gives a breakdown of the areas of the exposures, I’m assuming that sum on the left is €10 billion, is it … €10 billion and €600 million … on the left, yes … is that €10 billion?	2204

Mr. Tom Browne

Yes.

2205

Chairman

Okay. All right, so the other ones then are €627 million unzoned land; €3,580 million on zoned land; just about one-and-a-half billion on zoned land with planning permission and over €600 million, €641 million in fact, with speculative development and then the development, what’s the “w/c” there? What does that mean? Development?

2206

Mr. Tom Browne

Working capital.

2207

Chairman

With working capital with pre-sales and pre-lets of €4,240 million. Right. Did you have any concerns over the extent of the bank’s exposure to the development sector?

2208

Mr. Tom Browne

Absolutely and that’s why we tried to bring in the new policy change in early 2006 and if you look at kind of the comments there in terms of the real issue in regard to … the big risk in any bank around development lending is around its land exposure.

2209

Chairman

Okay. So how did you raise those concerns? What actually happened because this is … you say you raised it in 2006? This is 2007 and this is what the portfolio is showing.

2210

Mr. Tom Browne

Absolutely and again, it goes back to the point that, you know, a lot of, you know … a significant amount of that exposure would have been to our top clients and again, it’s … again highlighting, you know, the mistake that was made … that we didn’t cap out with some of those bigger clients.

2211

Chairman

Maybe you can just talk me through this so I can understand it. There is a risk analysis being done here in terms of exposure and what is happening is that property is being broken down into different sort of categories. Am I correct there, yes?

2212

Mr. Tom Browne

Absolutely and based on the risk element of the actual … going from unzoned land across to development with pre-sales, your high-risk category is your unzoned land and then you move across in terms of the risk profile so your risk profile in terms of your development … with pre-sales, pre-let, you believe you’re actually kind of, you know, you’re working out there … in terms of actually, your pre-sales, pre-lets will repay your debt. The real issue here, when you look at kind of where the risk was, is around unzoned land and zoned land and again, the mistake that was made is that we continued to support people who were actually kind of acquiring, you know, that type of asset.

2213

Chairman

But could I put it to you. Mr. Browne, that the real risk, as a counter-proposal just to challenge that statement if you don’t mind, is that basically what we have here is a sectionised area of one single sector, which is property, albeit in different manifestations, and that Anglo were overly concentrated into the property market?

2214

Mr. Tom Browne

And that’s why we endeavoured, you know, in the years from kind of, you know, ‘04, ‘05, ‘06, ‘07 onwards, to actually spread the actual … the risk by moving into other areas like cashflow lending because it was recognised within the bank that we had an over-dependence on exposure to property, both development and investment.

2215

Chairman

How long of a period of time did this difficulty take to create?

2216

Mr. Tom Browne

Here?

2217

Chairman

Yes.

2218

Mr. Tom Browne

Well those clients, for example, you know, the main … the bigger clients we would have had would have been on our books for probably ten, 15 years.

2219

Chairman

So this was a crisis that developed over a period of time?

2220

Mr. Tom Browne

And I think, you know, when you look at kind of, you know … probably, as I said earlier on, what clearly came to our attention from probably the spring of 2006, the residential market had hit its kind of peak.

2221

Chairman

But this was a problem that had developed over a period of time.

2222

Mr. Tom Browne

Yes but—–

2223

Chairman

And was that problem developed through Anglo’s lending practice?

2224

Mr. Tom Browne

I think it was a combination of the way the market was starting to actually soften, you know, from probably 2006 onwards. We had built up an exposure in those areas over a number of years prior to that.

2225

Chairman

So would it … would … you repeated a number of times this evening that you departed in September 2007 or so but were the difficulties that came to unfold after post … after 2007 already in the ether and already in play before 2007?

2226

Mr. Tom Browne

I suppose that’s a reflection of where the property went after 2007. You know, everybody felt—–

2227

Chairman

Can we come back here? The risk is already in place, as you say, from 2006.

2228

Mr. Tom Browne

Yes but in 2007, right, the consensus view at the time was that, you know, the market was definitely starting to actually kind of get soft but a quantum of actually the collapse was not felt for a number of years thereafter.

2229

Chairman

Okay but … if I can maybe use an analogy, and it is not like somebody getting off theTitanic in Cobh because what happened afterwards was completely different, but subsidence in a house takes place because there’s a drainage problem not fixed and all of a sudden somebody has to come in and the underpinners and it costs a big load of money. So it’s not that the wall fell down yesterday is what the problem was; it’s that there was a problem not addressed over a long period of time and, hence, a major intervention. Was the problem in Anglo growing like a subsidence issue because there was a difficulty underpinning the structure, or was it that something happened later in 2007 that was unforeseen, and where did that come from?

2230

Mr. Tom Browne

No, I think, you know, the growth in the loan book had happened over a period of time. You would have been very comfortable, you know, up to 2006 in terms of where you were at in terms of the overall exposure, but from 2006 on, as the market definitely became softer, we tried to curtail our activity in regard to actually this element of the market and, unfortunately, we did continue to support some of the bigger clients who were the most active players and, as a result of that, the loan balances grew.

2231

Chairman

Okay, thank you. Deputy Joe Higgins.

2232

Deputy Joe Higgins

Mr. Browne, in that regard, is it the case that you gave extraordinary support to a handful of clients because from 2004 to 2005 customer lending went up by €10 billion in 2006, it went up €16 billion and in 2007, €17 billion? Now if that was in a period of restraint, how do you explain figures like this?

2233

Mr. Tom Browne

Are those figures in regard to the overall bank or just Ireland?

2234

Deputy Joe Higgins

The group.

2235

Mr. Tom Browne

Yes, but at that time, Deputy, you know, the group was expanding, you know, and had significant growth in the UK and in America at the same time. So the bank, you know, was not just growing in Ireland, it was growing across a geographical spread and it was felt at the time that that was a good strategy to adopt, that Ireland was a wealthy—–

2236

Deputy Joe Higgins

Do you accept that they are enormous figures?

2237

Mr. Tom Browne

Yes, I do accept they were very big figures.

2238

Deputy Joe Higgins

And, Mr. Browne, can I ask you … you were director of lending Ireland, 2004-2007—–

2239

Mr. Tom Browne

2005-2007.

2240

Deputy Joe Higgins

2005-2007. You were … risk and compliance committee 2005-2007. Are you saying that you gave full financial information to the board on the lending situation and, indeed, other aspects that you were responsible for during your time with this responsibility? And did any board colleagues ever express concerns to you or to other directors about the quality of information provided to the board?

2241

Mr. Tom Browne

No, there was never any … the board was given full transparency in regard to actually the loan book of all jurisdictions. The risk function would have reported to the board every time they did a loan review process. The top ten exposures would have been identified to the board on an ongoing basis. At no stage did I get a sense that the actual … the board members were getting anything but a fully comprehensive overview of the loan book from any jurisdiction.

2242

Deputy Joe Higgins

Right, you say in your opening statement, written, Mr. Browne, “in relation to exception management where a loan was being put forward that was outside of credit policy, this was clearly highlighted in credit papers for discussion at the credit committee meeting as to why the credit should be approved if an exception to credit policy and your decision to be made in relation to same at the credit meeting…”. Could I ask you to look at – sorry, I didn’t give notice of this – page 3, in Vol. 2 of the IBRC book? You have it yourself there, Mr. Browne, Vol. 2, page 3, it is easily got. This relates to documents from IBRC liquidators in NAMA, exceptions to credit policy for Anglo loans, and the findings at the very bottom and the very bottom paragraph:

2243

Of the 1,731 cases reviewed at client level, the number found to have represented an exception to credit policy was 1,073 or 62% of clients. The aggregate value of the exceptions identified was €31.97 million or 92% of the value of the Book which transferred to NAMA.

2244

Chairman

That is a typo. Actually it is a billion but it says a million on the page but it is actually a billion.

2245

Mr. Tom Browne

Yes. It is billion, Chairman.

2246

Deputy Joe Higgins

Mr. Browne, 92% of the book that was transferred to NAMA was by way of exception to credit policy but how do you explain …

2247

Mr. Tom Browne

Deputy, if I take you back, I think the answer is in the book itself, right. If you go to book number, Vol. 1, page 57, I think it is … if you again go back to that table where you see the level of exceptions in 2008 over a period of February ‘08 to July ‘08 has dramatically jumped from 26% to 42%, so … and the reason for that is … it states there in the document that, “The percentage increase in exceptions for July is primarily due to lenders applying a 20% discount to security values.” Now I presume what happened thereafter is that as asset values continued to actually collapse over the period of time, ‘08 onwards, every time the actual credit was going up to renewal on an annual basis, it was being highlighted as an exception because the lenders were actually applying bigger and bigger discounts to the underlying security. So, when that report was done it reflects the fact that within the bank, from probably ‘08 onwards, they were actually discounting the underlying value of the security, hence it shows up as an exception. When I looked at that as well, the only rationale I could come up, in terms of why that figure is such … it’s based on that the bank was, obviously, applying more and more discounts to the underlying security.

2248

Deputy Joe Higgins

You are saying a retrospective … retrospectively applied.

2249

Mr. Tom Browne

Yes, because every credit would go up to credit committee for an annual review, so a policy was, obviously, adopted in ‘08 after I had left the bank where they saw asset values were actually starting to actually decrease and, as a result of that … because, you know, it says 20% discount, it could have been higher thereafter. So every time a credit went up, it would, obviously, be shown as an exception to actually credit …

2250

Deputy Joe Higgins

Okay, I think we may want to get clarification on that from liquidators and NAMA but in any case, Mr. Browne, the fact that there was such a huge transfer of your loan book to NAMA at such a huge discount, does that imply that there was huge pressure on your employees to expand and expand lending way beyond safe limits?

2251

Mr. Tom Browne

No. There was no pressure on anybody to expand lending. It didn’t work like that. There was no pressure whatsoever on the actual … on the lenders—–

2252

Deputy Joe Higgins

Okay.

2253

Mr. Tom Browne

—–because the reality of it was … is that, I think, the key thing that drove the growth of the book was a function of a client base of the bank, which was a very active client base.

2254

Deputy Joe Higgins

Mr. Browne, you said you had read theAnglo Republic book by Simon Carswell. He portrays a different picture based on interviews with former employees and you’ve probably seen it where he says … I have not time to quote it all, but I will just quote, as follows from page 50 … the credit committee meetings – “It was a cross between a Nuremberg rally and the half-time talk to an American football team,’ says one ex-Anglo manager. ‘There were between fifty and sixty people in the room … The whole system was set up wrong. No one was going to dissent in that atmosphere.” That suggests … Do you agree with that?

2255

Mr. Tom Browne

I don’t agree with that at all.

2256

Deputy Joe Higgins

Okay. Can I ask you a final question then, Chairman, because my time, unfortunately, is up. It is this—–

2257

Chairman

Take more time, if you wish there now.

2258

Deputy Joe Higgins

Mr. Browne, do you … oh, yes, a second last question then. In the annual report for Anglo Irish Bank 2006 … you were also involved in the human resources department, is that correct?

2259

Mr. Tom Browne

Yes, I was head of group HR as well as …

2260

Deputy Joe Higgins

Okay. Can I ask you what was the reason for Anglo Irish Bank’s anti-trade union policy, and were you an originator or an enforcer of that?

2261

Mr. Tom Browne

No. I was not an originator or an enforcer of it.

2262

Deputy Joe Higgins

And what the rationale—–

2263

Chairman

Try not to be leading now, Deputy, even though I am giving you more time.

2264

Deputy Joe Higgins

Sorry?

2265

Chairman

I am giving you a bit more time but try not to be leading in the question.

2266

Deputy Joe Higgins

Yes. I’m not leading, Chairman, because in minutes of a board meeting where there was to be a merger proposed—–

2267

Chairman

Yes.

2268

Deputy Joe Higgins

—–one of the downsides, according to the bank management, was the fact that the union would now come into the reckoning.

2269

Chairman

A question.

2270

Deputy Joe Higgins

I am just asking … non-union policy, let’s say that, what was the reason for that?

2271

Mr. Tom Browne

The view was there was … the view within the bank … that if people wanted to bring a union in, it wasn’t actually, kind of, stopped but there was no requirement to bring a union in because the staff didn’t seem to demand it.

2272

Deputy Joe Higgins

Right, finally then, Mr. Browne, you … I think you did say you regretted the damage that has been done to the economy in relation to what happened in the banks. Did I hear you correctly in that regard?

2273

Mr. Tom Browne

Yes.

2274

Deputy Joe Higgins

And do you accept that there have been rather serious and very bad consequences for ordinary people as a result of the bubble and the bust?

2275

Mr. Tom Browne

Absolutely, Deputy. You know, it is with deep regret what has happened.

2276

Deputy Joe Higgins

Is there an irony then, Mr. Browne, that you now run a debt-restructuring company and involved with you are—–

2277

Chairman

That is not on.

2278

Deputy Joe Higgins

—–some of the biggest debtors in NAMA?

2279

Chairman

Sorry, Deputy, I’m moving on. Senator Sean Barrett, please.

2280

Deputy Joe Higgins

What’s wrong with that?

2281

Chairman

You’re outside the terms of reference, timewise and everything else. There’s also an implied statement with regard to an institution that has not been called before us and its operation.

2282

Deputy Joe Higgins

I was just asking Mr. Browne—–

2283

Chairman

I know that and I’m moving on.

2284

Deputy Joe Higgins

—–if there’s an irony in the fact that he’s—–

2285

Chairman

I know that and I love to give you as much time as I can, Deputy, but in this case I have to pull back. Senator Sean Barrett.

2286

Senator Sean D. Barrett

Thank you, Chairman. Thanks for coming in, Mr. Browne. The Anglo annual report for 2007 on page 3 shows that over the period 2002-7, profit before tax increased by 376%, earnings per share by 363% and total assets by 398%. Do you think that these levels of growth were prudent or sustainable in the context of the level of competition in the Irish lending markets during that period?

2287

Mr. Tom Browne

Sorry, Senator. What period again was it?

2288

Senator Sean D. Barrett

I’ll give it to you again. I must have spoken too quickly. The Anglo annual report for 2007 shows that over the period 2002-7, profit before tax increased by 376%, earnings per share by 363% and total assets by 398%. And then the question was: do you think that these levels of growth were prudent or sustainable in the context of the level of competition in the Irish lending market during that period?

2289

Mr. Tom Browne

I think, Senator, what they reflect is again going back to the very active client base we had in a very active market where we enjoyed a very high level of repeat business over those five years. So they were a function of, you know, as I say the client base that had … the bank had developed, probably over the previous ten, 15 years who were very active in the marketplace.

2290

Senator Sean D. Barrett

And then were those levels of growth … do they imply that the pursuit of growth was affecting credit quality and lending standards?

2291

Mr. Tom Browne

Again, going back to the point about kind of, in terms of the process of lending in terms of actually … every loan that came up for approval went from the team doing their due diligence to the mini-credit forum, who actually was the lenders themselves deciding whether the risk was acceptable. And then going on to main credits where group risk was the final arbitrator whether the risk was acceptable. So that process was the standard approach in terms of actually, kind of, the individual loans that were actually underwritten at the time.

2292

Senator Sean D. Barrett

In Vol. 1, page 37, Mr. McAteer and Mr. Moran sent a memo to the board in 2007 – “High growth banks seldom die of old age”. They say, “A key balancing act for us is to impress upon the market that Anglo’s growth is delivered in a measured and conservative manner, without loosening our credit standards.” Isn’t your evidence to Deputy Doherty and Deputy Higgins that there were 92% exceptions and Nyberg found that the audit committee … neither the internal audit nor the audit committee was in a position to challenge credit decisions where the main problems ultimately arose? I mean, wasn’t the model unsustainable?

2293

Mr. Tom Browne

Again, you know, I don’t think … it wasn’t unsustainable in the context of where we were at at that moment of time. The exceptions, as I explained … you have to look behind the reason behind the exception in every loan. You know, at the time in the marketplace when you were actually going out to investors, you were being quizzed on a continuous basis in regard to the sustainability of the model. And in every situation we were actually able to kind of explain why we felt the model was sustainable. And the growth in the bank really in the years was going to come from markets such as the UK and the USA.

2294

Senator Sean D. Barrett

But didn’t Davy Stockbrokers and Merrion Stockbrokers in early 2007 and about a year later put the shares as overvalued by two thirds?

2295

Mr. Tom Browne

But again the market was the one who dictated where the share price was at. That was the market taking a view where they felt the value of the share was at.

2296

Senator Sean D. Barrett

And a reflection that this model was unsustainable because it was based 88% on property, following a property boom which was … when the bubble was bound to burst, wasn’t it?

2297

Mr. Tom Browne

That’s why we were trying to actually spread the risk in terms of our entrée into other areas of the marketplace by developing kind of other aspects of the business.

2298

Senator Sean D. Barrett

But did you ever get your lending share to industry even into double digits?

2299

Mr. Tom Browne

Sorry, Senator?

2300

Senator Sean D. Barrett

Did you ever get the share of the loan book in industry above 6%, 7%, 8% even? It was 88% property. You were a monoline bank.

2301

Mr. Tom Browne

Absolutely. And that was why we were trying to actually kind of spread the risk by actually developing an approach into other areas of the market, because it was recognised within the bank that we were too property dependent.

2302

Senator Sean D. Barrett

And were you aware of the literature that, you know, fast growing banks as the quote that they gave at the board meeting—–

2303

Mr. Tom Browne

Yes and again—-

2304

Senator Sean D. Barrett

They do come to an end because it’s—–

2305

Mr. Tom Browne

And that’s why again—–

2306

Senator Sean D. Barrett

—–it’s not solidly based.

2307

Mr. Tom Browne

And that’s why again you were trying to actually kind of diversify the bank from both a geographical point of view and also from a sectoral point of view here in Ireland, because it was clearly identified that we needed to actually, kind of, reduce the over-dependency on lending to property.

2308

Senator Sean D. Barrett

So were you surprised, after you left Anglo, that it did collapse with 61%—–

2309

Mr. Tom Browne

I was—–

2310

Senator Sean D. Barrett

—–discount—–

2311

Mr. Tom Browne

Yes, because—–

2312

Senator Sean D. Barrett

—– when it transferred to NAMA?

2313

Mr. Tom Browne

—–when I left the bank there was absolutely no sense at all that there was any stress on the system either from the credit point of view or from the funding point of view. So I was shocked when I left the bank in … after I left it in 2007 because I had no … as I said in my opening statement, it was alien to me that there was kind of a liquidity or a solvency issue coming up the track as I was leaving in 2007.

2314

Senator Sean D. Barrett

The St. Patrick’s Day massacre, did that cause you to change your views?

2315

Mr. Tom Browne

Well, obviously the market was talking at that stage. I’d left the bank … well and truly left the bank at stage. And obviously there was other issues going on in terms where … the world financial markets were in crisis at the time and it was rebounding back on all the banks here in Ireland.

2316

Senator Sean D. Barrett

Did they react in the correct way from the bank’s perspective to the CFD? Were they too slow to react? What would you have done if you had known earlier about the CFD purchases?

2317

Mr. Tom Browne

Chairman, I don’t think I can go—–

2318

Chairman

I don’t think you can either. Final question, Senator.

2319

Senator Sean D. Barrett

Sorry, I did not intend to—–

2320

Chairman

That’s all right.

2321

Senator Sean D. Barrett

—– cause difficulties; it was a genuine question. Thank you, Mr. Browne, and thank you, Chairman.

2322

Chairman

Thank you very much. Deputy John Paul Phelan.

2323

Deputy John Paul Phelan

Thank you, Chairman. Good evening Mr. Browne. Firstly, I want to refer to the book that has been referred to by many others, Mr. Carswell’sAnglo Republic. In it, it states that you were paid €3.75 million from Anglo when you resigned in November 2007 as a golden handshake or retirement package. Is that correct?

2324

Mr. Tom Browne

That’s correct, yes.

2325

Deputy John Paul Phelan

How do you feel, yourself, now in light of what we’ve subsequently discovered with Anglo and its operations and the cost to the Exchequer about that sum?

2326

Mr. Tom Browne

I suppose every day I worked in Anglo I worked kind of to my best of my ability. I suppose I used my best judgment in any decisions I made or any decisions I influenced while I was there. When I left the bank in 2007 I felt I’d done a good job and I felt I left behind a bank that there was no undue stress when I was walking out the door. So all decisions I took when I was there and implemented, I took them all in good faith. You know, when I handed in … when I told the chief executive and the chairman that I was leaving, it was the board’s decision to actually decide whether I was entitled to, you know, a payment. I decided I was leaving. Whether I got one or not was irrespective. I was leaving, my race was run. And, you know, the board decided that they were going to actually recognise my efforts over the previous 15 or 16 years.

2327

Deputy John Paul Phelan

That’s fair enough. I was reading your … part of your biography there, during your second term in Anglo, and it is remarkable reading because you seem to have held a lot of different, kind of, roles within the bank at the … at the same or similar times. You were the head of … managing director of lending for Ireland between 2004 and 2007, when lending went from €3 billion to €38 billion.

2328

Mr. Tom Browne

Sorry, from 2005.

2329

Deputy John Paul Phelan

€13 billion, sorry, to €38 billion. Do you think … do you think, I suppose, basically, that was a sustainable level of increase for that four year … for that four-year period?

2330

Mr. Tom Browne

It wasn’t sustainable, it just happened, you know, in terms of, you know, you’d a very active client base in a very active market with a landscape that actually created those type of opportunities, and we had a client base that we continued to support and, as I said earlier on, we supported too strongly.

2331

Deputy John Paul Phelan

Okay. Again referring to the … Mr. Carswell’s book, it is noted in one point, or mentioned in one point, that you have been critical of senior management in Anglo. I’m instructed by legals not to get involved in that discussion and I—–

2332

Chairman

We are not dealing in a legal framework, so it’s not that you’re instructed, you’re obliged.

2333

Deputy John Paul Phelan

Yes, and I’m obeying the instruction. But I want to know, do you feel yourself that there was any of your conduct, or “any of your own conduct” is probably the wrong word, but any things that you did, particularly in your time as head of lending in Anglo, that contributed to the financial difficulties ultimately a year after you left and to the, you know, exposure of the taxpayer to billions of euro of … that’s lost?

2334

Mr. Tom Browne

I don’t … I don’t understand your question.

2335

Deputy John Paul Phelan

Yes, you … I was referring to the … that you had been critical of senior management in Anglo.

2336

Mr. Tom Browne

Sorry, where do you get that from?

2337

Deputy John Paul Phelan

It’s from Mr. Carswell’s book—–

2338

Mr. Tom Browne

Sorry I—–

2339

Deputy John Paul Phelan

—–as well.

2340

Mr. Tom Browne

Can you … can you—–

2341

Deputy John Paul Phelan

I can. Page … it’s the Kindle version, page 5911, where he said, and I’ll quote it, the conduct of senior officials at Anglo had ultimately proved—–

2342

Chairman

I think I need to be mindful of allegations there now.

2343

Deputy John Paul Phelan

Sorry this is not an alleg—– this is a published—–

2344

Chairman

Yes, I know, there … the … as we mentioned before the meeting here, I would urge the Deputy to err on the cautious side rather than to create a risk. We’re just about a day away from concluding public hearings. We haven’t ended up in court yet and I’d like to see the closing line in the same manner.

2345

Deputy John Paul Phelan

Okay, look it, really the point I suppose I’m trying to ask you, Mr. Browne, is do you feel … you’re saying that Anglo was grand when you left in 2007. You were head of lending for the preceding four years, if you like—–

2346

Mr. Tom Browne

Two and a half years.

2347

Deputy John Paul Phelan

Well, okay, two and a half years. Do you feel that any of your actions in that time contributed to the downfall of the bank a year after you left?

2348

Mr. Tom Browne

As I said in my opening statement, you know, I’d no sense that the bank was under any stress as I was walking out the door—–

2349

Deputy John Paul Phelan

Okay.

2350

Mr. Tom Browne

—–and that’s my honest view. As I was leaving I had absolutely no sense of any issue coming down the track.

2351

Deputy John Paul Phelan

In your opinion was the decision to combine the roles of finance director and chief risk officer prudent or appropriate at the time when loans … time when loans were growing so rapidly, in terms of the need to maintain an independent risk function at the time allocation needed, albeit that both responsibilities essentially were merged into one? Do you think it was a prudent decision?

2352

Mr. Tom Browne

And again, that was a decision which would have been taken after I departed. I don’t think it was the right decision because I think given the growth of the bank at the time, I think it would have been a much better decision if there would have been an independent risk function completely dedicated to the risk activity.

2353

Deputy John Paul Phelan

Okay. Can I ask you did you see the evidence of Mr. Moran, Matt Moran, when he was in here last week?

2354

Mr. Tom Browne

No, I didn’t, no.

2355

Deputy John Paul Phelan

He stated, and I want to put a quote that he said … gave to the inquiry. He said, with respect to Anglo, that “the lending function was excessively dominant”—–

2356

Chairman

Deputy Phelan I will let you finish and I’ll stop the clock now. I’m just getting reports that there is dreadful mobile phone interference coming in proximity to you there.

2357

Deputy John Paul Phelan

Okay, well, I don’t … I don’t have a mobile phone here. Where was I? “The lending function was excessively dominant in the bank and that the risk function controls were, ultimately, insufficient”. What you make of that comment?

2358

Mr. Tom Browne

Well, the lending function was always, you know, the dominant function in terms of the bank and where it came from. I wouldn’t accept that the risk function didn’t have, you know, it’s independence, staffed up by high-quality people who had the independence to be able to, kind of, decide whether the risk is acceptable or not, and I would’ve always seen the risk function as being more than capable of actually calling the … the decision in regard to whether the deal made sense or not from a risk point of view.

2359

Deputy John Paul Phelan

Finally, briefly, the FitzPatrick’s tapes book by Tom Lyons and Brian Carey outlines that you had a meeting with the regulator, staff of the regulator, after the collapse of Northern Rock. Basically I want you to briefly to outline what was discussed at the meeting, and if you could, what types of issues the regulator was raising with you on behalf of Anglo, or do you remember … do you remember that?

2360

Mr. Tom Browne

I don’t remember that meeting at all.

2361

Deputy John Paul Phelan

Okay, that’s fair enough.

2362

Chairman

Thank you. Moving on, next questioner is Deputy Kieran O’Donnell. Deputy.

2363

Deputy Kieran O’Donnell

Thanks, Chairman. Welcome, Mr. Browne.

2364

Mr. Tom Browne

Thank you.

2365

Deputy Kieran O’Donnell

NAMA estimated that there was €9 billion in interest roll-up in the loans transferred by the five banks to NAMA, and they said €3 billion of that related to Anglo. Now they … I’m … the document I’m referring to, Chairman, is Vol. 2 page 27. It was evidence given by Brendan McDonagh, who’s the CEO of NAMA. I suppose the question really was were you aware of that level of interest roll-up in the Anglo loan book? Would those figures have been made aware to the board and senior management and dashboards on a regular basis … management information dashboards? How was this level of risk … increased risk monitored within the bank? And do you believe that the bank had adequate information systems to monitor this risk properly?

2366

Mr. Tom Browne

Yes, again, when I read that I was surprised at that figure when I read it. You know, again I would have … I would have thought—–

2367

Deputy Kieran O’Donnell

Can I … can I just clarify one or two points, Mr. Browne? When in 2004 did you become managing director of lending in Ireland?

2368

Mr. Tom Browne

It was 2005.

2369

Deputy Kieran O’Donnell

2005, and what date did you actually leave Anglo, because the … what precise date did you leave Anglo?

2370

Mr. Tom Browne

I left probably around the start … probably the end of September, the start of October.

2371

Deputy Kieran O’Donnell

Because I looked at the … at the … the annual accounts for 2007 for Anglo, and they state … which are dated 27 November, they state that you were shortly leaving the board.

2372

Mr. Tom Browne

Yes, I didn’t—–

2373

Deputy Kieran O’Donnell

That was the end of November.

2374

Mr. Tom Browne

I didn’t actually … because we were in closed period I was effectively there until 27 November officially, but I was physically gone out of the busi—– the bank some time around … in some time in October.

2375

Deputy Kieran O’Donnell

Okay.

2376

Mr. Tom Browne

So that was a technical issue in terms of, actually, on the accounts.

2377

Deputy Kieran O’Donnell

Okay, and the €3 billion roll-up—–

2378

Mr. Tom Browne

Yes, again, like—–

2379

Deputy Kieran O’Donnell

How would that have arisen?

2380

Mr. Tom Browne

That would have probably … that would have come about mainly from the development loans where you would have, you know, interest … interest roll-up would’ve actually been part of some of those deals, Deputy.

2381

Deputy Kieran O’Donnell

Was it a common feature among development loans?

2382

Mr. Tom Browne

On land acquisition loans it would have been, you know, on the basis that you would’ve looked at the loan you were happy to actually, kind of, allow the roll-up on the basis of the profile or where you saw the actual project moving out—–

2383

Deputy Kieran O’Donnell

So, say if one of your existing clients rang you and said, “I’ve a land deal I want to invest in”, and … would you typically … did you distinguish between with or without planning?

2384

Mr. Tom Browne

Yes, again going back to the report we had, you know, the various aspects of the land in terms of it’s zoned, unzoned, planning, with working capital, so very much clearly it was identified in terms of what the risk category in regard to the land loans, and land was always, you know, the risk … the high-risk capital.

2385

Deputy Kieran O’Donnell

So typically you’d have given interest roll-up on land. If that developer—–

2386

Mr. Tom Browne

Again, it’d depend who the developer was, the client was, not—–

2387

Deputy Kieran O’Donnell

And would you—–

2388

Mr. Tom Browne

—–not in every case would you’ve given interest roll-up.

2389

Deputy Kieran O’Donnell

Would you allow interest roll right up to developing the site, building houses on the site?

2390

Mr. Tom Browne

Again you may, depending on the project, depending on the location of the project, depending on the actual developer that was behind it, depending on your view of, kind of, the actual, you know, the end … the end product in terms of its salability. So again, so every loan like that was looked at in terms of, you know—–

2391

Deputy Kieran O’Donnell

Did it not leave the bank very exposed to a downturn?

2392

Mr. Tom Browne

It did, and it was always a big concern. Land was always going to be … always the area of concern in terms of actually, kind of, loans like that, and that’s why, you know, the 2006 change of policy was an attempt to try to curtail activity in that regard where we said—–

2393

Deputy Kieran O’Donnell

That was only for new lending. The existing clients you continued to lend to.

2394

Mr. Tom Browne

I know and that’s, as I said earlier on, that was the big mistake we made, unfortunately.

2395

Deputy Kieran O’Donnell

Why did you leave Anglo?

2396

Mr. Tom Browne

I suppose why I left was, my race was probably run at that stage—–

2397

Deputy Kieran O’Donnell

What do you mean by your race was run?

2398

Mr. Tom Browne

I was interviewed for the top job in 2004, which I didn’t get. I decided to stay … David Drumm asked me to stay after he’d got the job. I decided to stay and by the time 2007 came … I’d always a desire to set up my own business. I was 45—–

2399

Deputy Kieran O’Donnell

Would you accept, Mr. Browne, that during your period as managing director of lending in Ireland, that was the rapid escalation in property lending within Anglo?

2400

Mr. Tom Browne

Again, on the basis of figures it was, but I think it’s on … it was a reflection of the fact that, again, we had a very active, you know, client base in a very active market that, unfortunately, we continued to actually support—–

2401

Deputy Kieran O’Donnell

But it happened under your watch.

2402

Mr. Tom Browne

We also were actually … but it wasn’t just property. We were also actually, you know, increasing our exposure to new areas of lending in terms of cash flow-type operations.

2403

Deputy Kieran O’Donnell

Will you expand, then, in terms of your leaving … the reasons you left? So, you said your race was run, you went for the top job in ‘04. Subsequently?

2404

Mr. Tom Browne

And then I decided I was, what, 45 years of age at that stage. I wanted to set up my own business and I felt that was the right time to do it. If I didn’t do it at that stage I probably would never have done it. And that was the reason why I decided to leave.

2405

Deputy Kieran O’Donnell

There wasn’t in any way … like it’s circumstantial that you left a relatively short time before the Patrick’s Day massacre in terms of share price in Anglo.

2406

Mr. Tom Browne

No. It was very much a personal decision.

2407

Deputy Kieran O’Donnell

Okay.

2408

Mr. Tom Browne

I decided to go, in terms of … I had informed the chief executive and the chairman in April of that year that I wanted to leave and I didn’t see anything coming down the tracks, as I said in my opening statement. As far as I was concerned the bank was in rude good health in … as I was leaving. And as I said earlier on in my statement, I never … a liquidity or solvency event was alien to me in terms of my thinking as I was leaving.

2409

Deputy Kieran O’Donnell

Can I just refer, very briefly, to the Anglo Irish …Anglo Republic … and you made reference in your opening statement that you were not made aware of the contracts for difference. You said “I was not made aware. Other directors were.” I’d just refer to page 108 of it, where it’s “Gary McGann, chief executive of paper and packaging group Smurfit … and a non-executive director at Anglo, pushed the matter at a board meeting in early September.” This refers to the contracts for difference. “By now the directors felt it was time to speak to [the] Quinn directly.” Were you a member of the board at that time, Mr. Browne?

2410

Mr. Tom Browne

I was, yes.

2411

Deputy Kieran O’Donnell

Do you remember that issue coming up at the board at that time?

2412

Mr. Tom Browne

That issue was discussed for several months because there was rumours in the market, probably from February 2007, you know … there was rumours in the market about what was going on. And again, Chairman, I just need to be careful here.

2413

Chairman

Well, I would … I would encourage you to err on the side of caution, Mr. Browne, really, if—–

2414

Mr. Tom Browne

Yes. So, it was … it had been discussed at several meetings over a number of months because—–

2415

Deputy Kieran O’Donnell

Was that from February onwards?

2416

Mr. Tom Browne

Yes, because the market was kind of … rumours were circulating, right, and obviously that comment was on the basis of – well somebody better go and find out. Chairman, I just need to be very careful—–

2417

Chairman

Yes. Hold it there. Have you any other question that’s not related to that?

2418

Deputy Kieran O’Donnell

Well no, it was that Mr. Browne said he wasn’t made aware of it and I’m asking that … was the board and were ye made aware of it?

2419

Mr. Tom Browne

Again, I can’t—–

2420

Chairman

Yes, I know, we’re not going to go there. Thank you.

2421

Deputy Kieran O’Donnell

Okay.

2422

Chairman

Thank you Mr. Browne. I’ll now bring in Deputy McGrath.

2423

Deputy Michael McGrath

Thank you very much Chair. Good evening, Mr. Browne. Can I start by taking you to core booklet Vol. 1, page 67? So, this is an inspection of commercial property lending activities at Anglo by the Financial Regulator in May 2007. And in the—–

2424

Chairman

That will have to be referenced off the book. I think it’s —–

2425

Deputy Michael McGrath

That’s fine, yes. Mr. Browne has it anyway. Page 67, Vol. 1. So, that particular inspection by the Financial Regulator identified 30 separate issues which it required to be addressed and which it listed in a report dated 27 June 2007. Varying degrees of seriousness, I think would be fair to say, Mr. Browne, but a number of quite important issues. So, can I ask, were you made aware of this report as a board member and was it discussed by the board?

2426

Mr. Tom Browne

Yes, you would have been made aware of that and it would have been discussed and it would have been decided what action was required to go through each item on a one-by-one basis and deal with it and report back, in terms of the actual … the action taken in regard to that report.

2427

Deputy Michael McGrath

Okay and would correspondence from the Financial Regulator typically have been brought before the board?

2428

Mr. Tom Browne

Yes, something like that would have been brought before the board. And again, going back to, kind of, what I said earlier on, Deputy, my view of the board, in terms the openness and transparency, it was very much … if there was an issue that had to be discussed, it would be brought up forthright and put before the board in terms of any issues that needed to be discussed. So, something like that, I would have said to you, would’ve definitely have been brought up to the board—–

2429

Deputy Michael McGrath

Yes.

2430

Mr. Tom Browne

—–for notification, with a view to actually kind of, making sure that action was taken on the back of it.

2431

Deputy Michael McGrath

Okay and to your recollection that wasn’t the only time that correspondence from the regulator would have been included—–

2432

Mr. Tom Browne

Yes—–

2433

Deputy Michael McGrath

—–in the board pack and discussed.

2434

Mr. Tom Browne

Yes, and again, and any—–

2435

Deputy Michael McGrath

Okay.

2436

Mr. Tom Browne

The other point with that, Deputy, would’ve been that any time there was any interaction between the regulator and mainly through, I suppose, the finance director, that would’ve been … in my view would’ve been brought to the attention of the board. Again, going back to the point that there was—–

2437

Deputy Michael McGrath

Okay.

2438

Mr. Tom Browne

—–to make them completely aware on a timely basis of any issues that arose.

2439

Deputy Michael McGrath

Sure and in respect of this particular correspondence, who was responsible for dealing with it and for ensuring that it was followed up on and the recommendations implemented?

2440

Mr. Tom Browne

Again, it would probably be divided up between the risk function and the lending … and lending people.

2441

Deputy Michael McGrath

But it wasn’t you?

2442

Mr. Tom Browne

Sorry, some of it could have been within my remit and some of it would have been, probably, through the risk function. I would’ve said the overall responsibility for dealing with it would probably have been at the foot of the risk people supported by the lending people in terms of relevant aspects of it.

2443

Deputy Michael McGrath

Okay. Can you recall specifically what action was taken—–

2444

Mr. Tom Browne

I can’t.

2445

Deputy Michael McGrath

—–on foot of this?

2446

Mr. Tom Browne

I can’t recall specifically on this, Deputy.

2447

Deputy Michael McGrath

Sure. Okay. Just an issue that was raised earlier on by Deputy Higgins … just intrigued me. You were head of group HR for a time, is that right?

2448

Mr. Tom Browne

When the management changes took place in … from January 2005, I was appointed both head of Ireland and head of group HR.

2449

Deputy Michael McGrath

January ‘05 until when?

2450

Mr. Tom Browne

Until I left in 2007.

2451

Deputy Michael McGrath

Okay. How does the head of lending Ireland also become the head of human resources?

2452

Mr. Tom Browne

It was probably felt by the then chief executive that I was probably the best man to put together a cohesive HR policy across the group, in terms of … he obviously felt that I had an ability to actually put together—–

2453

Deputy Michael McGrath

Right.

2454

Mr. Tom Browne

—–a HR policy.

2455

Deputy Michael McGrath

Was there a HR department?

2456

Mr. Tom Browne

There was a HR department but I went out and recruited new people into the HR department.

2457

Deputy Michael McGrath

Okay.

2458

Mr. Tom Browne

Recruited new people into the UK—–

2459

Deputy Michael McGrath

Right

2460

Mr. Tom Browne

—–but predominantly would’ve taken control of putting a cohesive HR policy in place.

2461

Deputy Michael McGrath

And who reported to you in respect of HR issues?

2462

Mr. Tom Browne

There was a … the HR person that I actually recruited to report directly in to me here in Ireland was a gentleman called Seán Fitzpatrick. A different Seán Fitzpatrick.

2463

Deputy Michael McGrath

A different … and what was his position? He was—–

2464

Mr. Tom Browne

He was director of HR—–

2465

Deputy Michael McGrath

Right.

2466

Mr. Tom Browne

—–reporting in to me. So he had a management … his … he came from a HR background.

2467

Deputy Michael McGrath

Right.

2468

Mr. Tom Browne

So he came in to bring, kind of a whole HR—–

2469

Deputy Michael McGrath

Okay.

2470

Mr. Tom Browne

—–professional approach into it.

2471

Deputy Michael McGrath

And on the other governance issue and sticking with the name Seán FitzPatrick, when he left as CEO and became chairperson of the board in 2005, you were on the board at the time. Was that a move that you supported? Was there a serious discussion on that as to whether it was the appropriate thing to do from a governance point of view – that the outgoing CEO would step straight in as chairman?

2472

Mr. Tom Browne

Yes, I think the discussion, you know, around that issue would have been mainly taking place with the non-executive directors as opposed to the executive directors.

2473

Deputy Michael McGrath

Was that as a sub-committee of the board or was it not the board as a collective—–

2474

Mr. Tom Browne

No, it would have been—–

2475

Deputy Michael McGrath

—–would have discussed that?

2476

Mr. Tom Browne

It would’ve been mainly dealt with at, kind of, non-executive level rather than at executive level.

2477

Deputy Michael McGrath

In what forum? How would that … would they meet separately or—–

2478

Mr. Tom Browne

Yes.

2479

Deputy Michael McGrath

—–how would that work?

2480

Mr. Tom Browne

Again, they would’ve probably met separately in regard to issues like that, in terms of nomination committee and things like that.

2481

Deputy Michael McGrath

Right, okay. Just on the issue of exceptions to credit policy, just looking at page 3 of Vol. 2, this issue was touched on earlier on, but the reference at the very bottom of it, which basically is a summary of the aggregate of exceptions to credit policy for the period 2001 to 2008 prepared by … by the special liquidator, as such, found that of the 1,731 cases reviewed at client level, the number found to have represented an exception to credit policy was 1,073 or 62% of clients, in volume terms, and then in value terms, the aggregate value of the exceptions identified was €31.97 billion or 92% of the value of the book which transferred to NAMA. So, I know you explained some element of that would have arisen after you left, but this was a representation of the 2001 to 2008 period. Does that match your experience in your role?

2482

Mr. Tom Browne

No. Again, there was exceptions and, as I explained earlier on, you know, when you look at exceptions you have to go behind the individual reasons for every exception. As we saw in one of the other exhibits, you know, probably in the latter years as asset values, security values, actually kind of diminished, the bank obviously was taking a very conservative approach in terms of writing down security values—–

2483

Deputy Michael McGrath

Right.

2484

Mr. Tom Browne

—–and every time a loan came up for review at credit committee, if they were writing down securities by, they say 20% there, it’s not surprising that actually the exception, you know, levels increased.

2485

Deputy Michael McGrath

If we look at, like, page 13 of the same booklet, there were some changes to the credit policy in July 2005. So when we talk about exceptions to credit policy, presumably we’re talking about exceptions to these type of rules which were in place about maximum loan-to-value across—–

2486

Mr. Tom Browne

Exactly.

2487

Deputy Michael McGrath

—–the different type of lending.

2488

Mr. Tom Browne

Because, again, to give an example of that, you know, if the credit policy was no more than 75% loan-to-value and if through the process of approval, you know, a credit came up where it was 80% loan-to-value, it was highlighted at, you know, at the approval stage and a decision would’ve been taken based on the, you know, … could be on any whole host of reasons why the loan would be approved on, you know, at an exceptional level. So, you know, somebody saying, “Well, the credit policy says 75% loan-to-value but the loan has come up at say 80% loan-to-value”, so it’s highlighted from the word “go” and a decision is made to approve that based on other, you know, circumstances. So it’s clearly identified from the word “go” in terms of that approval. What the discussion around why you would approve it, you know, will depend on a whole range of reasons.

2489

Deputy Michael McGrath

Sure. But, I mean, a lot of your answers on this issue and on the issue of security seems to be the case-by-case analysis, but, I mean, I have to put it to you that the basis of making a decision on a case-by-case scenario doesn’t seem to have regard to what the policy was. The policy seemed to be breached on a wholesale basis, looking at the figures that we have before us.

2490

Mr. Tom Browne

Yes. No, based on that figure, right, okay. But, you know, again, you know, if you look at that figure there which is, you know … is you highlighted there … you know, again it goes back to what’s behind, you know, each of those loans, right. Why are they exceptions? If the bank has decided in 2008 to write down, you know, the underlying security by 20%, that, in itself, and you can see the figure there, it went from, what, 28% to 46% over the period of four or five months as a result of the bank deciding that, you know, let’s kind of take a 20% haircut in the underlying value of the security, and that’s why an awful lot of accounts will end up being exceptions in that situation.

2491

Deputy Michael McGrath

Sure. That’s a snapshot in 2008, but we’re looking at the aggregate position—–

2492

Mr. Tom Browne

Yes, you know, but the reality of it is, yes, I would say to you, go back to kind of, you know, the period ‘01, ‘02, ‘03, ‘04, ‘05. Yes, there would have been exceptions to credit policy. They would have been reported on a monthly basis, just like that report we saw there, okay, and there would have been, you know, a specific reason behind each of those exceptions, why it was an acceptable thing to do.

2493

Deputy Michael McGrath

The point I am making is the exceptions seemed to become the norm. If the policy had to be breached that often, then either you weren’t following the right policy or it was being—–

2494

Mr. Tom Browne

Or the policy had to be changed. As you said there, in the 4th of July, the policy was changed there from 75% to 80%, you know, development finance. So, the policy was always being kind of … was always being moved, you know, to actually—–

2495

Deputy Michael McGrath

Policy was catching up with the practice – trying to.

2496

Mr. Tom Browne

Yes, it could be, and reflecting the fact that market dynamics had changed and competitive pressure was out there.

2497

Chairman

I just want to clarify one thing for you there, before you conclude, Deputy, because this might want to bring you back in again, okay. Is the … if I could … in your witness book, there, page 67, that’s … it’s the letter to the Financial Regulator, 27 June 2007. It’s in Vol. 1. It won’t come up. It’s just I want to get a clarification on it more than anything else. You … were you a non-executive director, Mr. Browne, yes? Were you an executive or non-executive?

2498

Mr. Tom Browne

Executive.

2499

Chairman

Executive, okay. In … and you haven’t seen this document before, no?

2500

Mr. Tom Browne

Sorry, the one from 2007?

2501

Chairman

You’re familiar with this document.

2502

Mr. Tom Browne

Sorry, I would … I would’ve presumed I saw it back in 2007.

2503

Chairman

All right. It’s just to say that in his statement in evidence Mr. Gary McGann stated that as a non-executive director he’d never seen this letter. Could you clarify whether, in your opinion, that it would’ve gone to the non-executive directors?

2504

Mr. Tom Browne

I would be surprised if it didn’t. That would be my understanding of it.

2505

Deputy Michael McGrath

He said it was discussed at the board, a few months ago.

2506

Mr. Tom Browne

That would be my … sorry, that would’ve been my understanding of it, Chairman.

2507

Deputy Michael McGrath

It’s different.

2508

Mr. Tom Browne

You know, looking at that letter, my understanding is that it would have. But I can’t remember it. I don’t remember this document, obviously.

2509

Chairman

Okay.

2510

Mr. Tom Browne

Right. But I would have expected that letter would’ve gone to the board.

2511

Chairman

And Mr. McGann would have been part of the correspondence list.

2512

Mr. Tom Browne

He would have been on the board at the time, obviously, yes.

2513

Chairman

I’m just trying to clarify that now, for sure.

2514

Mr. Tom Browne

Yes. But, sorry, my understanding of it, you know, that that would have gone to the board.

2515

Chairman

Are you concluded then, Deputy McGrath?

2516

Deputy Michael McGrath

Yes. Thank you.

2517

Chairman

Okay. Senator O’Keeffe.

2518

Senator Susan O’Keeffe

Thanks, Chair. Mr. Browne, I know that you say you haven’t read the Nyberg report but I’m just wondering … they … in the Nyberg it says that the … it observes that the Financial Regulator raised concerns over the shortcomings in Anglo’s risk function, but it isn’t clear whether the risk committee or the board saw the letters relating to that. So, do you recall ever seeing that correspondence from the regulator relating to Anglo’s risk function?

2519

Mr. Tom Browne

I don’t recall it at this stage, Senator.

2520

Senator Susan O’Keeffe

Okay. So that means literally that – you don’t remember.

2521

Mr. Tom Browne

I don’t remember. Sorry, I don’t remember.

2522

Senator Susan O’Keeffe

That’s fine. That’s fine. Broadly, what share of responsibility would you say that Anglo would shoulder for the banking crisis?

2523

Mr. Tom Browne

You know, obviously, it shares a significant portion of the blame.

2524

Senator Susan O’Keeffe

Right. Significant. Is that – you’re the man with the figures – is that more or less than 50%?

2525

Mr. Tom Browne

I think, you know, there’s no hiding from the fact that it significantly attributed to the problem that arose as a result of the collapse of the property market. There’s no hiding from that fact.

2526

Senator Susan O’Keeffe

Okay. I have to say I am wondering, in fact, why your own statement to this inquiry is so short, Mr. Browne. It’s two and a half pages long. I think it’s the shortest statement we’ve probably received. Was there a reason why your statement is literally that short?

2527

Mr. Tom Browne

No, I just … I was just trying to keep it as concise as possible.

2528

Senator Susan O’Keeffe

Okay. In the book,The FitzPatrick Tapes, and don’t worry this is not contentious, it’s an observation made by Seán FitzPatrick himself, and he was talking about how, after David Drumm had been appointed, he said well:	2529
The bank was about lending. … The lending guys were all about Lionel Messi. They were all strikers. They were the pop stars. They were the guys who were making the f-ing money. They didn’t worry about how the money was got to give to them. As far as they were concerned they were the guys lending money and that was where it all was. That was where the culture was as well.	2530
Now Mr. FitzPatrick, obviously – pretty much important guy in your bank. What do you think about his observation?	2531

Mr. Tom Browne

Well, the bank was driven … it was a lending bank, you know, that’s what it was, that’s what it started out as. And the treasury operations, you know, its primary responsibility was to actually fund the growth of the loan book. So it was, fundamentally, a lending bank.

2532

Senator Susan O’Keeffe

Was it lending at all costs?

2533

Mr. Tom Browne

I don’t think it was. I think there was a very clear process in terms of, actually, kind of, how the whole … you know, the whole loan approval process went and how it evolved over the years. It was very thorough, it was very complete. You know, all the management tools around management of the loan book in terms of watch lists, everything like that, you know—–

2534

Senator Susan O’Keeffe

Although Mr. FitzPatrick does say they didn’t worry about how the money was got to give to them. I mean, he’s … he’s saying that himself about your own bank.

2535

Mr. Tom Browne

Well, I think what he … I think what he’s referring to there is that, you know, they didn’t worry about, you know … the treasury guys, you know, as on … on the funding side, their responsibility was to be able to go out and develop new strands of funding to be able to fund the actual growth of the … of the loan book. And the bank, you know, in the latter … you know, in the latter years, you know, was kind of developing, you know, its operations in the UK and in America, so suddenly you had the three, kind of, areas of geographical growth in terms of the … yes, the loan growth in the bank.

2536

Senator Susan O’Keeffe

You’ve said several times, Mr. Browne, that when you left the bank in September ‘07 that it was in – I think you used the expression – “rude health”. Mr. Moran, when he gave evidence, on page 76, he was talking about how it had started. He said, “the start of the liquidity crisis or the first signal that became available in the market”, that was August 2007, and then he goes on to talk about Northern Rock, which, clearly, you would be aware of. So is Mr. Moran wrong? I mean, lots of people have given evidence that, really, things started to get very tight August-September, really beginning to feel the tension by October-November, never mind then what happened when you had left. So, I’m just wondering, would you revise your view or do you—–

2537

Mr. Tom Browne

No, because—–

2538

Senator Susan O’Keeffe

So why then does the … did the liquidity crisis start and then why was that of not … no concern? Why do you not rate it as a concern?

2539

Mr. Tom Browne

You know, again, going back to my comments earlier on, I didn’t … you know, I didn’t get any sense that, you know, liquidity was becoming an issue as I was leaving the bank in … in—–

2540

Senator Susan O’Keeffe

But what was that about then? What was the tightening … why is he saying that and why have plenty of other people said it?

2541

Mr. Tom Browne

Well, I think … I think … I think the first people … the first event that people, kind of, point to was Northern Rock in September 2007. That was the first, kind of, real public manifestation that there was problems starting to actually arise in the whole, you know, liquidity world. And it went from there.

2542

Senator Susan O’Keeffe

Although he says August, I think Northern Rock was September, but—–

2543

Mr. Tom Browne

Yes, September, yes. I—–

2544

Senator Susan O’Keeffe

—–do you still maintain—–

2545

Mr. Tom Browne

Yes. Yes, I would—–

2546

Senator Susan O’Keeffe

—–you didn’t—–

2547

Mr. Tom Browne

I didn’t have any sense in … in … in August, you know, of that year that there was any problems in terms of, actually … in terms of liquidity from the bank’s point of view.

2548

Senator Susan O’Keeffe

You said at the start that when you came back to Anglo … when you’d been asked to come back by Mr. FitzPatrick, that I think you returned to manage the wealth management division. Is that correct?

2549

Mr. Tom Browne

That’s correct, yes.

2550

Senator Susan O’Keeffe

And so, tell us, was the wealth management division, was that high net worth individuals?

2551

Mr. Tom Browne

Basically at the time what it was was you had probably five satellite operations, all very much independent republics in terms of, you know, Vienna, Geneva, the Isle of Man, Dublin private banking, the assurance company, and they were all very much doing their own thing. The creation of the develop … of the … what I was asked to do was pull together, you know, a cohesive approach in terms of those businesses in terms of creating a strategy around them in terms of growing the business, and using, kind of, some of the attributes of, say, the fund management expertise in a place like Geneva and see could it be applied in places like Dublin or London or Vienna. So it was … they were … they were very much independent republics in their own right before that and the idea about creating the division was to actually pull it all together and put a, kind of, a strategy around the business.

2552

Senator Susan O’Keeffe

And, as I say, what did that involve though? Was it about high net worth individuals or—–

2553

Mr. Tom Browne

Well, I … again—–

2554

Senator Susan O’Keeffe

No.

2555

Mr. Tom Browne

—–the profile of each individual location was completely different. You know, you go from, say, Geneva was probably high net worth individuals, to the Isle of Man, which was very much retail deposit. So each of the … each of those operations had a very, very different clientele.

2556

Senator Susan O’Keeffe

And did it involve the creation of property syndicates?

2557

Mr. Tom Browne

Yes, it did in latter years, yes, yes.

2558

Senator Susan O’Keeffe

Right. And was that something you had a hand in?

2559

Mr. Tom Browne

I was—–

2560

Senator Susan O’Keeffe

Or you were involved with rather?

2561

Mr. Tom Browne

It was something that would have … would have been … would have been happening over the … over probably from, you know, 2003-’04 onwards.

2562

Senator Susan O’Keeffe

And what relationship was there then? What interface was there between that part of the business and the bank part of the business or was it utterly separate?

2563

Mr. Tom Browne

Yes, no, it was separate and then the … you know, the private bank … that would have been mainly done out of Ireland, where the private bank would have gone and sourced these investment opportunities, you know, and probably in the early days was predominantly probably in the UK. Then there was probably some European opportunities brought and then latterly there was some things in America brought … brought into the private bank.

2564

Senator Susan O’Keeffe

What share of—–

2565

Chairman

Okay, time to wrap up, Senator.

2566

Senator Susan O’Keeffe

What share of the profit of Anglo Irish Bank would have been contributed by that division?

2567

Mr. Tom Browne

Senator, in the initial years when it was set up, it probably was less than 5%. It was a very small part of the bank.

2568

Senator Susan O’Keeffe

Sure.

2569

Mr. Tom Browne

With … and by pulling it all together in terms of trying to create a cohesive approach, the ambition was maybe to grow that maybe to 10% of the profits over a five-year or ten-year period.

2570

Senator Susan O’Keeffe

And just—–

2571

Mr. Tom Browne

So it was … it was always going to be a very small element of the bank.

2572

Senator Susan O’Keeffe

Small but comfortable.

2573

Mr. Tom Browne

Growing.

2574

Senator Susan O’Keeffe

And, just to clarify, when you … when you changed your job and became head of lending, Ireland, some … that division stayed though. I take it somebody else took that job.

2575

Mr. Tom Browne

Yes, yes, somebody else took that … yes, exactly.

2576

Senator Susan O’Keeffe

So it didn’t close down.

2577

Mr. Tom Browne

No, no. No, no.

2578

Senator Susan O’Keeffe

Thank you.

2579

Chairman

Thank you very much. I’m going to move to wrap things up inviting Deputy Murphy to conclude, please. Sorry, my apologies, Senator D’Arcy just indicated on one point.

2580

Senator Michael D’Arcy

Yes, just very … just two very small things, Mr. Browne.

2581

Chairman

Turn off your phone first. There’s some areas there that’s—–

2582

Senator Michael D’Arcy

I asked Mr. Peter Fitzgerald if he had read the book and he said he had and I asked him was it a genuine reflection—–

2583

Chairman

Please. I’m going to hold for a second, Senator, because there’s terrible phone distortion there, wherever it is coming from. Okay, continue again, please.

2584

Senator Michael D’Arcy

I asked him was it a genuine reflection of the way business was transacted within Anglo Irish Bank. Can I ask your opinion on it, please?

2585

Mr. Tom Browne

I don’t … I don’t think it is.

2586

Senator Michael D’Arcy

You don’t think it is.

2587

Mr. Tom Browne

No.

2588

Senator Michael D’Arcy

Okay. And then, finally, Mr. Browne, your severance payment of €3.75 million. You left the institution; were they obliged to pay you a severance package?

2589

Mr. Tom Browne

No, they weren’t.

2590

Senator Michael D’Arcy

They weren’t. And it was within their gift to do so.

2591

Mr. Tom Browne

Yes.

2592

Senator Michael D’Arcy

Was that very generous?

2593

Mr. Tom Browne

Yes, you know, in any man’s language it was generous.

2594

Senator Michael D’Arcy

And was it the norm for people leaving who decided to leave, where there was no legal obligation to pay anything?

2595

Mr. Tom Browne

I think the precedent had been set by, you know, two other directors who had left and … you know, in, I think, ‘05 and ‘06.

2596

Senator Michael D’Arcy

Who were they?

2597

Mr. Tom Browne

John Rowan and Tiernan O’Mahony.

2598

Senator Michael D’Arcy

And what were they paid?

2599

Mr. Tom Browne

I think around … roughly around the same thing. I think the figures were much the same.

2600

Chairman

Okay. Thank you very much. Deputy Murphy.

2601

Deputy Eoghan Murphy

Thank you, Chairman, and thank you, Mr. Browne. Just to come back to this 2006 policy change. You decide you’re going to stay with your proven clients, the big developers who’ve got large scale projects in Ireland and that’s going to be the MO from 2006 on. And then total lending in Ireland doubles over this period of time. Were you placing too much trust in these special clients that you were sticking with from 2006? And I’m not asking you about trust in their business abilities, I’m asking about trust in their wealth, how much you perceived that they owned, their exposures in terms of their assets or what they were developing and too much trust in terms of how much they were telling you they were borrowing from others?

2602

Mr. Tom Browne

I think … I think, you know, I think it’s an interesting word, “trust”, you know, we backed them because we believed their … of … we believed their ability to deliver on the projects. You know, there were people that we had, kind of … we had developed a close relationship with over ten, 15, 20-year period, and we’d seen them perform and, I suppose, the view was that if there was going to be a soft landing, you know, the people that you wanted to be in the trenches with were people that had a track record of delivering performance. And the view would have been that these were the people to actually, kind of … to support.

2603

Deputy Eoghan Murphy

So your lending was based on belief rather than based on hard data or—–

2604

Mr. Tom Browne

No, obviously the first criteria was: did a deal make sense?

2605

Deputy Eoghan Murphy

Okay.

2606

Mr. Tom Browne

You know, were you happy with the risk, were you happy with the credit risk, were you happy with, kind of, the actual proposal in terms of its … its work-out, its repayment proposal? And then … and then the issue was: are these the type of people you want to actually, kind of, deal with?

2607

Deputy Eoghan Murphy

Were you making assumptions of their own personal wealth in terms of personal guarantees? Were you making assumptions in terms of what they might be exposed to in terms of borrowing from other banks?

2608

Mr. Tom Browne

No, we were—–

2609

Deputy Eoghan Murphy

Was any of this being backed up with paperwork in terms of—–

2610

Mr. Tom Browne

No, we would have … we would have looked for full visibility. We would have seen it through their annual accounts.

2611

Deputy Eoghan Murphy

But did you have full visibility?

2612

Mr. Tom Browne

In many cases we did.

2613

Deputy Eoghan Murphy

Because there was an inspection done by the Financial Regulator at the end of 2007 and … you had just left, but this relates to lending done under your period in charge. And there was a number of findings and one of the findings was that, “several show how much trust the banks were placing in the unverified assertions of their borrowers with regard to their personal wealth, and how inaccurate some of the information being used by the banks was.” It talked about management estimates of wealth, not estimates coming from the person who was selling but management sitting there, coming up with numbers but not having anything behind that other than their own impression of the borrower.

2614

Mr. Tom Browne

Going back to my own experience, like, you know, I remember having several meetings with some of the bigger clients. When you went through detail of their exposures and their actually … and their net worth positions, you know … and that would have been something that I would have done on a number of occasions with some of the bigger clients.

2615

Deputy Eoghan Murphy

“The inspectors noted that the institutions have been unable to obtain a Net Worth Statement from [Mr. X], as he is unwilling to disclose such details in writing. In addition, the statements provided by [Mr. Y and Mr. Z] have not been certified by a third party”. So, was this happening in Anglo?

2616

Mr. Tom Browne

Sorry, it could have happened, yes. I’m not saying it didn’t happen but there would have been, kind of, you know, fairly detailed conversations around, you know, the bigger clients’ exposure to other banks, the bigger clients’ kind of, you know, net worth positions and verification of that information.

2617

Deputy Eoghan Murphy

This inspection report found that the understanding of bank A’s exposure to a developer … another bank’s exposure to the same developer was out by more than €1 billion. So I mean, how can you tell me that you had accurate understanding of their exposure to the banks and then you could be out by potentially €1 billion in this case?

2618

Mr. Tom Browne

Again, you know, it comes back to the point in terms of actually … you were interrogating the people in terms of getting the information. You know, there was a level of trust.

2619

Deputy Eoghan Murphy

Okay, a level of trust. A big developer who you have now decided to back, you know, from 2006. Are you really going to interrogate them about their personal wealth or their exposure to other banks when they’ve been with the bank for so long? Would you really be able to have that relationship with them?

2620

Mr. Tom Browne

I think you would have had to have been able to have that conversation with them. And like, and I would remember on several—–

2621

Deputy Eoghan Murphy

And you would just trust the figures?

2622

Mr. Tom Browne

Sorry, you might … if you wanted to query it and get it backed up, you’d look for that information. But I remember having several conversations with some of the bigger developers, going through that in detail.

2623

Deputy Eoghan Murphy

And what about this idea of management estimates rather than figures coming from the borrower themselves?

2624

Mr. Tom Browne

That’s not the ideal scenario but I’m not saying it didn’t happen.

2625

Deputy Eoghan Murphy

Okay, then that contradicts what you just said about the vigorous approach you took to getting this information.

2626

Mr. Tom Browne

No, but some of the … on the bigger ones, for example, I can talk personally, right. We would have sat down with them and gone through their detail in terms of their overall exposures to the banks and where their, kind of, net worth position was.

2627

Deputy Eoghan Murphy

And they would have provided documentary evidence for that in every case?

2628

Mr. Tom Browne

Sorry, you would have looked for that, yes, and—–

2629

Deputy Eoghan Murphy

Would you have gotten it?

2630

Mr. Tom Browne

Sorry, we would have gotten it. In the cases I can remember, we would have.

2631

Deputy Eoghan Murphy

Okay.

2632

Chairman

Thank you. Deputy Doherty, please. Wrap up.

2633

Deputy Pearse Doherty

Page 15 of Vol. 1 details the Public Accounts report of July 2012 on the crisis in the domestic banking sector and it notes:	2634
Anglo had poor governance structures and procedures and risk controls during its period of high growth. Weaknesses in these areas were identified by auditors and regulators in 2003, 2006 and 2008. … Management showed a lack of awareness of risk and focused their attention on business growth.	2635
So, with that noted, Mr. Browne, how do you reconcile these comments with the positive statements on the governance structure of the bank contained in the corporate governance statements each year in the bank’s annual reports?	2636

Mr. Tom Browne

Sorry, could you repeat that question again?

2637

Deputy Pearse Doherty

The whole lot of it?

2638

Mr. Tom Browne

The key part of it.

2639

Deputy Pearse Doherty

Okay. I’ll have to start from the start because … Do you understand what’s in the PAC report in terms of the poor governance structure, the fact that the auditors and regulators identified weaknesses in these areas in 2003, 2006 and 2008, that the management, which you’re part of, showed a lack of awareness of risk and focused their attention on business growth? And I’m asking you how do you reconcile those comments of the PAC’s report with the positive statements on the governance structure of the bank that was contained in the corporate governance statements each year in the bank’s annual reports?

2640

Mr. Tom Browne

It, obviously contradicts it, you know. In terms of this report, you know, there’s a complete contradiction.

2641

Deputy Pearse Doherty

Yes, we know that because the auditors identified … the PAC revealed that the auditors identified weaknesses in 2003, 2006 and 2008. How come … the point here is how come the statements of corporate governance every year in the bank’s annual reports was giving you a clean bill of health basically?

2642

Mr. Tom Browne

You know, it’s actually, kind of, on the basis that they were made aware of those issues … and they must have been made aware of, kind of, what action was being taken on the back of those reports … they must have been happy that, kind of, whatever was being identified was being dealt with and they were happy to sign off on the basis of, kind of, their report. So they must have looked for satisfaction that something was being done in the context of the issues that had been raised.

2643

Deputy Pearse Doherty

Do you believe that the management showed a lack of awareness of risk and focused their attention on business growth?

2644

Mr. Tom Browne

I don’t on the basis of the risk function, you know, as I said, you know, in my view, was staffed up with, you know, very good lenders—–

2645

Deputy Pearse Doherty

Okay.

2646

Mr. Tom Browne

—–from both inside and outside the bank, you know, and were very much on top of raising the issues and bringing them to the attention of the respective people.

2647

Deputy Pearse Doherty

Okay. I want to refer to another book – sorry, if you just bear with me – Matt Cooper,Who Really Runs Ireland? I’m not sure if you are familiar with the book or not.

2648

Mr. Tom Browne

Sorry, say—–

2649

Deputy Pearse Doherty

Matt Cooper’s book,Who Really Runs Ireland? It’s a book that he published. You’re referenced or you’re mentioned in the book along with Tiernan O’Mahony, both of you leaving a number of years after not being appointed to the top position. He talks about Tiernan O’Mahony writing in The Irish Times as far back as 2002, saying the big days of 40% per share profits are over and it’ll be more likely to be 15% to 20%. But he mentions … he says about you, and I will quote just for your benefit:	2650
Browne stayed on for another three years before leaving with the same generous package as O’Mahony enjoyed. In that time, he tried to reduce the bank’s exposure to the Irish property market. As far back as early 2005, he told me that it had become dangerously overheated and too dependent on tax breaks. There was limited value left for investors. However, while he had some success in reducing the bank’s exposure, it continued to do new business in Irish property, both as a banker and as an investment organiser.	2651
He goes on to talk about how Drumm wanted to prove himself FitzPatrick’s equal, wanted to double the profits of the bank within five years, which he did within two. So, can I ask you is that a true reflection of your own position at that point in time in 2005? Were you trying to reduce the over-exposure to the Irish property market at that time in the bank and was there other pressures within the bank?	2652

Mr. Tom Browne

No, it is a true reflection. I remember the conversation. I suppose the first attempt to try to do that was the change of policy in 2006. I remember the board meeting well where it was debated long and hard in regard to the policy change and the policy change was adopted by the board. You know, there was several examples where I saw this market getting seriously overheated. The policy change was an attempt to actually curtail our activity. As I said earlier on, you know, we didn’t do it … we didn’t impose that policy strong enough. You know, we continued to support, you know, the bigger clients when we shouldn’t have – we should have kept out – and we failed in terms of the implementation of that policy. So, from that … so, you know, the policy that was brought to the board was the attempt to try to curtail activity and that was reflective of that comment.

2653

Chairman

Okay, thank you. With that said, I’m going to bring matters to a conclusion. Mr. Browne, is there anything you would like to add by manner of closing comments, further remarks or additional information?

2654

Mr. Tom Browne

No, Chairman. I think my opening statement that I read sums up my view of … and my regret in terms of what happened and I think the statement covers it in full.

2655

Chairman

Thank you very much, Mr. Browne. With that said, I’d like to thank you for your participation this evening and your co-operation with the schedule today and your engagement with the inquiry. You’re now formally excused and it is proposed that the meeting is adjourned until 9 a.m. tomorrow, Thursday, 10 September, when we will conclude our final day’s hearings, our public hearings, of the inquiry. Is that agreed? Agreed.

2656

The joint committee adjourned at 9.38 p.m. until 9 a.m. on Thursday, 10 September 2015.

2657

---

Téacsanna Iomchuí

1. Téarmaí Tagartha
2. An tAcht Um Thithe an Oireachtais (Fiosrúcháin, Pribhléidí agus Nósanna Imeachta), 2013
3. Togra Iomchuí Do Na Coistí Um Nós Imeachta Agus Pribhléidí De Chuid Dháil Éireann Agus Sheanad Éireann
4. Orders of Reference of the Joint Committee