The Financial Regulator today published its
Report into the Examination of Loans to Directors and connected parties at six of the credit institutions covered by the Government Guarantee Scheme for the period December 2005 to December 2008. This review followed the discovery of the removal and reduction at year-end of a director loan at Anglo Irish Bank. It was aimed at discovering if any of the covered institutions were reducing loans at year-end to avoid disclosure in their financial statements.
The review covered the following institutions: Allied Irish Banks, Bank of Ireland, EBS Building Society, Irish Life and Permanent plc, Irish Nationwide Building Society and Postbank Ireland Limited. The report does not cover Anglo Irish Bank which is the subject of a separate, on-going investigation by the Financial Regulator.
Following the review, the Financial Regulator has issued new requirements in relation to the disclosure of director’s loans and has written to all credit institutions regarding the matters raised during the examination. The Regulator is following up and will take appropriate action on issues raised by the review and has also informed other relevant authorities of the issues arising from the review that are of relevance to them.
The report found that all credit institutions subject to this review provide loans to directors and the type of loan varies according to the business of the credit institution. Loans to directors are typically provided on the same terms and conditions as for other customers. Some credit institutions however provide a staff home loans scheme at preferential rates, which is available to the directors.
The findings of the examination are:
No evidence was found in the six covered institutions of the removal or reduction of loans at the year-end to avoid disclosure in the financial statements
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None of their directors loans was impaired, in arrears or otherwise non-performing for the period 31 December 2005 to 31 December 2008
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All of the directors loans reviewed were in compliance with the Financial Regulator’s limit of 2% of own funds
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There were some inaccuracies in disclosures in financial statements in most of the institutions examined, because of weaknesses in the procedures and controls for the preparation of the disclosures of directors’ loans. These included loans to directors or to connected parties not identified and therefore not disclosed (table 3), incorrect balances on disclosed loans (table 4) and loans included in disclosures that were not required to be disclosed
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The largest non–disclosure of a loan to director amounted to EUR148,214. The largest non disclosed loan to a connected party amounted to EUR11.3 million
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Some 10% of disclosures signed by directors were incorrect
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One institution had omitted two small loans of less than EUR16,000 from the data submitted to the Financial Regulator in response to its letter of 24 December 2008
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No evidence was found of loans other than loans that are available to all staff members (e.g. staff mortgages) that were issued with preferential terms
The full report can be view here:- http://www.financialregulator.ie/press-area/press-releases/Documents/Directors%27%20Loan%20Report.pdf
http://www.financialregulator.ie
