UPDATE 1-Irish central bank probes whether tapes show rule-breaking

Wed Jun 26, 2013 4:09pm EDT

Related Topics

* Public outrage over bank bailout growing after tapes leak

* Central Bank to liaise with police, probe possible violations

* Could re-run referendum to give investigation more bite

By Padraic Halpin and Conor Humphries

DUBLIN, June 26 (Reuters) - Ireland's central bank will investigate whether tapes of senior bankers laughing at regulators contain evidence rules were broken during the 2008 rescue of failed lenders that eventually led to the country's EU bailout.

In a statement on Wednesday, the central bank said it would liaise with police over the probe into whether breaches of regulatory requirements had occurred. "The Central Bank is carefully studying the various transcripts emerging. This is something that is viewed very seriously," it said.

The central bank has the power to prosecute some criminal offences through the courts and can refer others to the police for prosecution.

Public outrage is growing in Ireland after a newspaper published transcripts of taped telephone conversations between executives of the now-defunct Anglo Irish Bank, wrecked when a property bubble burst in 2008 after years of reckless lending.

Rescuing Anglo and two other banks eventually cost taxpayers some 30 billion euros, almost one-fifth of annual output, devastating the economy and forcing Dublin to take an 85 billion euro IMF/EU bailout in late 2010.

The central bank did not say which rules may have been broken, but some of the taped conversations have been widely interpreted to mean that Anglo Irish underplayed the likely cost of rescuing it in order to secure the central bank's support.

Main opposition party Fianna Fail, which was in government at the time of the crisis, called on Monday for a full inquiry into the collapse of the financial system and said the tapes should be referred to the police and corporate regulators.

"Any suggestion that the taxpayer was lured into bailing out Anglo Irish Bank under a false impression about the state of the bank's financial condition is deeply disturbing and has to be fully investigated by the authorities," said its finance spokesman Michael McGrath.

In the tapes published by the Irish Independent, Anglo's then-head of capital markets John Bowe was asked how it had come up with a figure of 7 billion euros for a rescue. He responded that he had "picked it out of my arse".

In another tape recorded as the crisis unfolded, executives sang the German national anthem and laughed as they discussed money flowing in from other countries after a guarantee of deposits held in Irish banks.

Bowe and another executive, consumer banking chief Peter Fitzgerald, have said they regret the conversation but denied any wrongdoing or intention to mislead the central bank.

Ireland's 4.6 million people have remained sanguine through the country's deep economic crisis, rarely taking to the streets in protest, but reaction to the so-called 'Anglo Tapes' has shown there is latent anger among voters.

Many Irish have had their salaries cut and faced a raft of tax hikes to help pay debts resulting from the rescue.

The revelations are also seen as damaging to Ireland's efforts to secure more European funds to recapitalise the banks and so cut the debt it took on to bail them out.

PARLIAMENTARY INQUIRY EYED

On Wednesday, a government source told Reuters a referendum rejected by voters in 2011 that would give lawmakers powers to point the finger of blame at individuals might be restaged to beef up a possible parliamentary inquiry into the bank rescue.

"Once the referendum was defeated, the attitude of government was to accept that, but the manner in which this has burst into the public domain again requires government to look at every option," the source told Reuters.

A new vote would probably succeed, but would further delay an inquiry into events that are already nearly five years old.

The alternative is proposed legislation granting parliamentary committees more powers but prohibiting them from making adverse findings against individuals. Those called to testify might also be able to avoid answering questions.

With any inquiry unlikely to begin before 2014, it could clash with a trial on fraud charges of three former Anglo executives, including ex-chairman Sean FitzPatrick.

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