Thursday, 09 September 2010 01:25

Committee Chairman, Juan Watterson asked Mr Aspden if the FSC had been “shocked” by the collapse of Lehmanns and did it shape their view of the world.

Yes they had been, but with Fannie Mae and Fannie Mac going before it became just one in a number.

So had it triggered any alarm bells: like making sure things were fit for purpose in the IOM and needing to look at issues at home, inquired Mr Watterson?

It apparently did “trigger a more intensive look”, replied Mr Aspden, including a more intensive liquidity review. They contemplated a Zone A, European country going bust, so yes they had been looking at all sorts of scenarios; including who would be the lender of last resort.

So where was the main focus, inquired Mr Watterson; to which Mr Aspden responded, liquidity and went on to add also asset protection.

Mr Watterson pointed out the FSC had B&B to deal with then RBSI got into difficulties, so were they “swamped” by these events.

They had taken an early judgment has to how important certain banks were, said Mr Aspden, whether they were banks of “national importance”. The dilemma they faced, as the problems started to get serious, was they didn’t want to act too early and risk “pulling the pack of cards down”.

So when B&B got into trouble, they were only looking at an exposure of £500m, which relative to the total size of B&B was quite a small amount, said Mr Aspden.

So there was a lot of pressure on the FSC, he explained, and if they had thrown the “toy out of the pram in March” - and pulled all the money back to the IOM - they could have “run the danger of collapsing the dominos”. Furthermore, he added, the FSC, right up to 8^th October, were looking at KSF being saved; so didn’t want to act too soon.

Had they taken the “eye off the ball” then, asked Mr Watterson.

No they hadn’t, and they believed Kaupthing was a bank of national importance to Iceland and they understood the Icelandic government had said they were standing behind the bank.

Mr Watterson put to Mr Aspden, if they had thought Iceland was standing behind the bank what did they make of Alistair Darling’s view he had to act to protect UK national interests as the Icelandic authorities were only planning to look after own interests. Was it the case the FSC wanted to remove the risk to the group or just the parent?

Mr Aspden stated he wanted to avoid giving conflicting evidence to what he had said before, but it was the view of the board to remove the risk to Reykjavik but not necessarily to the whole group.

So had a more watered down proposal emerged, inquired Mr Watterson; and Mr Aspden replied, yes.

He went on to say he had been “given delegated power to negotiate a deal” to remove the risk to Reykjavik and to move the money to some where they were happy with.

Were the KSF(IOM) board given a few options to chose from or given an ultimatum do this or get a direction, inquired Mr Watterson.

“We had a concern but it was for the bank to respond” answered, Mr Aspden; and they did respond and this was relayed to the FSC board, not that he could recall many options being involved.

So you ended up with the FSC agreeing to the exposure to London, Mr Watterson put to Mr Aspden; to which he replied, yes.

So why had they agreed to water down the amounts covered, inquired Mr Watterson.

If they looked at the balance sheet, replied Mr Aspden, the exposure was less than the amount normally associated with the IOM banking model.

Mr Weldon also pointed out the £185m was covered by the Repo agreement.

Mr Watterson wondered if there was a difference in the gross exposure to the net amount; but Mr Aspden said they were happy to keep cash accounts, and if they took out netting and other cover, he suggested it wasn’t over significant.

Mr Weldon appeared to suggest the amount was only £18m.

Had they got an assurance the sister bank in London was operating with in its limits, inquired Mr Watterson; to which Mr Aspden said they hadn’t.

Mr Watterson again asked if the FSC had missed a trick and perhaps they could have latched on to the holding company director, Mr Foster.

Mr Aspden, perhaps surprisingly, answered they didn’t know information was being provided to the IOM board. However, he added they would not have relied on figures being provided by the bank but on what the regulator told them.

Had adequate due diligence been performed, asked Mr Watterson; Yes, replied Mr Aspden, but if they were looking at it with the benefit of hindsight, one thing for sure, if they were faced with the situation again, they would be holding a more intensive conversation with the FSA.

The issue was though, he explained, both (K Hf & KSF UK) had host regulators - described as ‘vertical’ form of regulation - leaving them effectively on the outside; and presumably less well informed.

Mr Weldon interjected that KSF had to operate to the UK rule book - and commented they had aggressively promoted the Edge accounts - and in his opinion the FSA would have acted if the bank was not sticking to the rules.

So had the FSA effectively been regulating part of the IOM entity inquired Mr Watterson.

Not really, replied Mr Aspden, but perhaps there had been an expectation of a higher level of communication, and if this had been so it may have overcome the ‘horizontal’ nature of their relationship with the London bank. He went on to say they never received a satisfactory explanation from the FSA regarding the lack of communication over the “difficulties in the UK”. However, he acknowledged the FSA undertakes a roll as a consolidated regulator but in their case the consolidated role was in Iceland.

So had they been only getting a “snapshot” in the IOM, inquired Mr Watterson, they were in a ‘box’ and would have to wait to be informed of a problem.

Mr Aspden just said the FSA came back to them with a further explanation of their policy approach.

Mr Weldon expanded on this by adding from his notes, they had treated the situation as an interbank issue, and they had had a long history of 30 years of dealing with Singer & Friedlander.

Mr Watterson raised the issue of whether the deposit with London should have been considered wholesale of retail.

Mr Aspden replied, at a seminar in London, a lot of thought had been given to ‘upstreaming’ and its treatment as wholesale deposits, and whether it should be treated as retail and the issue is still evolving.

Asked for his view on this, Mr Aspden said the view appeared to be the national regulators can not be expected to sign a cheque for every failed bank and they are looking at a shared responsibility approach rather leaving it to the taxpayer to pick up the whole bill. They are also considering the distinction between banks, such as the type in the IOM who take in deposits and pass them on to the parent.

Mr Watterson wanted to know though what more could be done to ensure the money comes back when “the chips are down”; and whether the wholesale route would be more advantageous.

Mr Aspden said too much had been going on that wasn’t known about, so it was difficult to make a comment other than it might be better to wait and see how the debate pans out.

Changing subject slightly, Mr Watterson wanted to know if they had had any concerns regarding the maintenance of capital or liquidity levels in the week leading up to the collapse.

Not really on capital adequacy, was Mr Aspden’s response, but liquidity was the main focus of attention.

Mr Watterson referred to a file note on a conversation with the FSA on the 6^th October, in which it stated it was clear the FSA was not going to share any information; and wondered if this should have prompted the FSC to contact KSF (IOM) and tell them to get on to the bank in London to help clarify the situation.

Mr Aspden said there was a constant four or five way dialogue going on, including Mr Adalsteinsson, to see if they could get the assurance liquidity would be made available by Reykjavik.

Mr Watterson again pointed out it didn’t seem to be working, and whilst Mr Aspden agreed, he said that comment related to the FSA, who he acknowledged were becoming more remote.

So would it have been appropriate at that point to contact the Treasury to let them know of the situation, because of the potential ramifications, inquired Mr Watterson.

Mr Aspden said he thought he had, but not necessarily about the problem with the FSA.

By this time, the time was getting late and Mr Houghton said he wanted to ask a few questions before the close, particularly about the ‘sanctions’ meeting, which confused Mr Weldon. Apparently he was referring to the meeting in May 2008 when the decision was taken to tell KSF (IOM) to reduce its exposure to Iceland.

In particular Mr Houghton wanted to know if Mr Weldon recalled the meeting and who was in attendance. Mr Weldon said he would have to check.

Secondly, Mr Houghton wanted to know about his note, on the 6^th October, about the £1b KSF (UK) had due overnight with Iceland, and sought confirmation this was the point that set the alarm bells ringing for him.

Yes it was, replied Mr Weldon.

So who did he report the problem to, and what did they do with the information, was Mr Houghton’s follow up question.

Mr Weldon, was a bit hesitant with his response, but assured Mr Houghton they were intensively discussing the issue, not that there was necessarily a formal record of it.

Mr Houghton seemed a bit surprised by the response and pointed out they were on the eve of a major crisis and wondered if they had called a board meeting; but Mr Weldon just reiterated they - himself, Mr Aspden and Mr Kermode - discussed the matter internally.

Turning to Mr Aspden, Mr Houghton inquired if he had spoken to the FME on the 7^th October; but Mr Aspden was a bit evasive in responding but finally said he had tried on the 7^th and 8^th but, incredibly,  couldn’t remember if he spoke to anybody beyond a secretary.

Mr Lowey then made another of his rambling points with some sort of question buried somewhere within it, which effectively was asking Mr Aspden would he now do something different if he had the chance.

Mr Aspden said it would be nice to say he could give the reassurance being sought but the problem is the FSC is not responsible for managing licence holders the directors are.

So no, he couldn’t say there was one thing that could be done differently which would provide the 100% assurance everything would be secure in the future.

Mr Watterson suggested whilst it may not be their job to save banks surely it was there job to see they were operating with as little risk as possible.

Mr Aspden agreed to a point, but said unless they took some risk they would not make any money; so the regulators job is to see that risk is mitigated and done in the best possible way.

Straying away a bit, Mr Watterson wondered what the reaction was to the administration of KSF UK, or was it a case of its Treasury problem now, “thank you and good night”.
No said Mr Aspden, as although Treasury stepped in with funding for the DCS, the FSC manage it; so no they didn’t “wash their hands” of the problem.

One of the first things he did, he explained was arrange a tripartite meeting in the UK as it was hoped the bank may still be saved.

However, they had been unaware of some of the actions of the UK authorities in putting the bank into administration - and they still hadn’t seen the court papers, which he said was incredibly unusual - such as the trust fund; and answers still need to be provided.

Bringing the issue back round to the IOM, Mr Watterson wondered if Mr Aspden thought the current IOM banking model is sound and fit for the future.

Mr Aspden said he would be the fisrt to say lessons needed to be learned, and he expected the committee’s report to touch on this. Certainly he thought the up-streaming model needs to be looked at as, as they sat there banks in the IOM are up-streaming well over the 50% KSF (IOM) had done.

He said he and Mr Weldon appreciate what the risks are, but it is a model that has served the IOM well for 35 years, including during recessions. Some could say more assets should be set aside locally but asked rhetorically is there the experience in the IOM to deal with this money. He obviously thought not.

He pointed out banks are the only source of corporate tax in the Island and employ a lot of people; and if they may the system risk free they wouldn’t make any profit to tax. The question effectively boils down, he said, to how much appetite for risk do the Island authorities have?

He added he didn’t think KSF (IOM) had been at the riskier end of the spectrum, and others are far more exposed (think Irish banks perhaps and certainly some of the UK ‘building societies’) and they are trying to “ride the fine balance” of economic activity v risk.

He recalled some of the Committee’s Tynwald colleagues over the years accusing the FSC of being over zealous with regulation; and if Tynwald wanted a riskier environment that’s what they will deliver.

So had the baseline appetite for risk changed since this experience, inquired Mr Watterson; to which Mr Aspden said it probably had. He said they had already commenced looking at this issue and whether local resources and independence should be strengthened; but it is still evolving.

However, as an academic exercise, whether 10%, 25%, 35%, or 50% is protected, if the parent gets into trouble, he said it will make no difference in his mind; and potentially if the parent goes totally you still are looking at 50p in the £ gone. If they take all the money out of the parent then it blows the IOM ‘model’ and it creates a fresh dilemma he said.

Nearing the conclusion of the session, Mr Watterson asked where he thought the IOM would be going in the next few years as an effective and growing financial jurisdiction; and would the risk management of it be developed.

Mr Aspden thought initially the committee’s report would guide them; but his current view is the IOM has got the system is has got and felt properly managed etc it is sustainable - provided the right banks are the ones operating here: i.e. nationally important banks to the home countries. This is in the hope they will be supported in times of problems, which may not be the case with other types of bank.

To which Mr Houghton quipped - which is where the FSA fell short on this occasion.

Quality not quantity, was Mr Lowey’s last remark; after which Mr Watterson, having confirmed no further questions or statements were to be made, drew proceedings to a close.

The KSF (IOM) Tynwald Select Committee website is now active but it does not appear to have been clearly publicized. Go to extranet.tynwald.org.im to view various documents submitted to the committee.

Thursday, 09 September 2010 01:25

Appearing for a second time before the Tynwald Select Committee - investigating the collapse of the IOM based subsidiary of Icelandic bank, Kaupthing - managing director Aidan Docherty provided, after a slightly hesitant start, an accomplished performance in defending the actions of the local bank’s directors.

With Donald Gelling, John Cashen and Andrew Davies noticeably taking a ‘back seat’, Mr Docherty did most of the talking during the session, which lasted just over an hour, during which time he was quizzed in some depth by the Committee Members: Chairman, Juan Watterson MHK, John Houghton MHK and Eddie Lowey MLC.

Mr Lowey kicked off the questioning, inquiring about the sale of the Derbyshire Building Society’s Isle of Man business to KSF.

Mr Docherty responded by handing over some documents to add to the ones submitted last November, which apparently included correspondence with the Financial Supervision Commission (FSC) and between Kaupthing Hf and the Icelandic regulator, the FME. He said it would help demonstrate the approval of the sale complied with all regulatory requirements.

Mr Docherty was also adamant the number of complaints about the sale were minimal and the number of customers moving their money elsewhere was “miniscule” compared to the total number of new customers.

Referring to evidence submitted to the inquiry by depositors, he reiterated customers were able to leave if they so wished, but did confirm some had to pay a penalty to do so. He also pointed out if a customer had paid a penalty to withdraw money in the lead up to the collapse of the bank - and their transfer had been caught up in the ‘in-flight money’, and the funds returned to the bank - they had the penalty cancelled and re-credited to their account. (No doubt this is a great comfort to the unlucky customers who didn’t quite get heir money out in time - Ed.)

Mr Watterson then explained the session would effectively be divided into three parts, with questions on the Derbyshire sale, the exposure to Kaupthing and finally the collapse of the bank.

Mr Lowey inquired if Mr Doherty thought the communication with Derbyshire customers had been sufficient and, with the benefit of hindsight, if he would do it differently today.

No, he didn’t think he would; and he believed customers were aware that a non-British bank was the purchaser. He said they didn’t just provide letters to customers but included a link to the Kaupthing website and the bank’s annual report on their own website. He added an electronic brochure for the ‘Edge’ accounts made it clear Kaupthing was the largest bank in Iceland and the number one bank in northern Europe. He was, therefore, slightly at a loss to know what more information that could be supplied.

Asked if the Derbyshire had continued to take money knowing full well it was to be taken over; Mr Doherty replied that it was the responsibility of the Derbyshire not KSF (IOM) to inform customers; and until the takeover was completed they were unable to control policy decisions of the Derbyshire management.

Asked by Mr Watterson about the reasoning for acquiring the Derbyshire, he got the same answer as supplied at the previous hearing: the bank wanted “quick access to funds”; but thoughtfully also added customers in return acquired access to multi currency products.

He conceded there had not been a mass exodus of Derbyshire customers to Kaupthing products, many stayed where they were, he said; and pointed out there had been a disappointing take up of the visa credit and debit cards.

Mr Lowey wanted to know what the directors had thought of the parental guarantee issued at the time; but Mr Docherty said whilst he did not want to appear evasive it was subject to a court case and so he couldn’t say much.

What he did say was as Kaupthing was “aggressively” seeking retail deposits, and in light of the Northern Rock situation, it was decided, in order to “allay some people’s fears” a guarantee would be put in place. He explained the draft was sent off to Iceland for checking by the legal people there as any call on the guarantee would be subject to Icelandic law. He said, as a result, some slight changes were made to the text to ensure it complied with Icelandic law; and this is what they placed their reliance on. He said they were satisfied the personnel involved were authorized to draw it up.

Mr Lowey put it to Mr Doherty they were the “A team”; but Mr Doherty replied “not quite” but not far off. They had included many of the key personnel involved in putting together the takeover, he said; and quoted from a section indicating the Kaupthing guarantee would take the place of the Derbyshire parental guarantee for depositors.

So it was a “fully fledged guarantee under Icelandic law” emphasized Mr Doherty. He added it built on the ‘letter of comfort’ supplied to the FSC, and in his opinion it clearly demonstrated all was ok.

He went on to tell the Committee the liquidator, PWC, has two legal opinions stating the guarantee is valid, and although the winding up committee may be questioning its validity the Resolution Committee had accepted it as valid. As far as he was aware he believes financial provision has been made in Iceland on the basis it is valid.

Moving on Mr Watterson commenced questioning about the exposure to Iceland, and wondered if they had been aware of the rebooking back to Kaupthing by KSF (UK).

Mr Docherty said they were as it was the Derbyshire money initially, but thereafter the amounts were smaller.

Asked if they had had any concerns about this at the time and whether they had considered spreading the money around, Mr Doherty replied that as far as they were concerned the ‘up-streaming’ model worked and they were given no information to raise doubts of financial difficulties.

Mr Watterson pointed out in March 2008 the FSC were concerned enough to demand action be taken; but Mr Doherty responded by saying the concern only related to removal of exposure to the parent and not the group.

So this had “opened the door” to the arrangement with the ‘sister’ bank, said Mr Watterson.

Mr Doherty said there seems to be an issue over the decision made by the FSC but as far as they were concerned in all correspondence from the FSC, and in meetings with them, they only ever talked about the parent not the group.

So it was down to what happened in London, suggested Mr Watterson, so how did they know the money wasn’t just “going in a big circle” and ending up back in Iceland. What information were they getting, he inquired.

They were getting monthly reports, replied Mr Doherty, the last of which was just a few days before the collapse on the 31^st August 2008. This showed the London bank’s liquidity mismatch was well within the FSA limits. However, he admitted they had only found out, after the event, of the £1b swap as they believed only £130m was exposed.

In fact they thought it was less than that at only £111m.

At this point Mr Doherty asked for a bit of latitude from the Committee as he wanted to get certain matters on the record and, making an assumption on the bank’s assets, ran through a number of figures coming up with an amount of £9m being the limit of KSF (IOM)’s exposure. He didn’t think, from their viewpoint, this figure represented a “real risk” to customers.

Mr Watterson inquired if this was correct even if the figures were netted off; and Mr Doherty replied that it didn’t matter.

Mr Watterson wanted to know what Kaupthing’s reaction had been to the requirement to move the money; to which Mr Doherty succinctly replied, “Not good”.

“Why”, asked Mr Watterson.

Because Kaupthing had seen KSF (IOM) as opportunity to bring in retail deposits to get away from commercial lending, he explained.

He went on to add that notwithstanding the volatility in the financial markets, they had thought Kaupthing was strong enough to get by, but a requirement to remove the deposits from Iceland would have defeated the object of the funding strategy and effectively created a liquidity problem. So they had ‘worked’ within the group to get the agreement of the FSC to move the money to London.

So this was where the Repo agreement came into play suggested Mr Watterson. He followed up on this by asking if there had been a threat to wind down the IOM business if, essentially, it no longer served a purpose of providing funds, through up-streaming, to the parent.

Yes it had been a concern for the management in the IOM, replied Mr Doherty, and it was an issue covered in their evidence submitted to the Committee; but they also had a “prudential” concern regarding the profit and loss account so it was not the “be all and end all” of the matter, he added.

So what were the practical difficulties of spreading the money around locally, inquired Mr Watterson.

Mr Doherty reminded Mr Watterson that at the time all banks were “scrabbling around for money” and it would have been just “giving away liquidity” when they felt they needed it for themselves; especially when they were “well ahead of the liquidity ratio set down by the FSC”.

Mr Watterson then queried the involvement of Machiavelli Consulting in the Repo agreement; to which Mr Doherty replied they were advising London and the documentation was in the standard form and had not been disputed by anyone.

So what about the unsecured £170m, asked Mr Watterson.

Mr Doherty said this came back down to the business model adopted in the IOM and that “up-streaming doesn’t come with security”; although he reminded them that is where the ‘guarantee’ comes in to play.

He said inter-bank deposits are not secured and put to the Committee if they look elsewhere in the Island, whilst the percentage of their unsecured assets was 36%, it is often in excess of 70%.

He then ran through a further set of figures to demonstrate how he felt KSF (IOM) was much less exposed than other institutions and had a far more diverse and broadly spread set of assets than many. In fact he went as far to say KSF (IOM)’s exposure was a “darn sight lower than around town”.

So is this why a return of over 90p in the £ is expected, inquired Mr Watterson; to which Mr Doherty replied it was especially as they had a very well secured loan book.

Reverting back to the period in early to mid 2008, when the FSC raised its concerns, Mr Lowey put it to Mr Doherty, whilst he may have been surprised by their requirement to reduce the exposure to their parent, times were not normal as the world was in turmoil; so wasn’t it a case of “the FSC just doing its job”.

Mr Doherty said he had no problem with the FSC doing its job, and concurred they were exceptional times, but pointed out they wanted to retain liquidity and they were “not going to give it up without a fight”.

He pointed out there were concerns about the viability of Barclays, Lloyds, Bradford & Bingley, Northern Rock etc, in fact “phenomenal distrust in the financial world” so there was “no confidence in other banks”. In other words why run the risk of putting their money into another bank which could fail at any moment.

He pointed out the margins they were on then compared to what is being charged now is quite marked, so although they did pay “to catch some business” and “to get them through the door” the intention was to then sell them additional products.

Mr Houghton finally entered the fray, and put it to Mr Doherty they had been happy to roll over the Repo but wanted to know why they hadn’t recovered some of the funds or at least thought about doing so.

As of the 8^th October 2008, explained Mr Doherty, they had £170m maturing in London the following week with a further £180m a short time later. That was the sort of liquidity they had available, he said, but as it matured it was being put on demand with KSF (UK).

They had sent an email to London to see if they could “break the contract” and get some of the maturing money sooner but the answer had been an “emphatic, no!”

Glitnir had then collapsed making the situation more difficult; but an announcement was made that Kaupthing was in negotiations with the government to secure its future. However, and more to the point, they had no information, at the time, that enabled them to go and demand the return of the funds. None of the information about the trust fund set up by the FSA was leaking out, so they were in the dark about the seriousness of their situation.

Mr Houghton suggested to Mr Doherty they had contacted Iceland asking for some of the £170m/£180m but Mr Doherty denied they had contacted Iceland and sought to break the contract. They had, he said borrowed £185m from Iceland but this had been off-set. However, what had happened was that on 3^rd October 2008 London had allowed them to withdraw £20m to fund “operational requirements”. Unfortunately a further £20m got caught up in Alistair Darling’s freezing of assets, which scuppered the chances of many KSF (IOM) customers getting their money in the last couple of days.

He pointed out to the Committee the money held in Reykjavik was on demand, although set-off, as they were managing the treasury position, whilst the funds in London were on contract.

Mr Houghton put it to Mr Doherty the ‘haircut’ had fallen so why hadn’t they asked for cash rather than additional assets.

Mr Doherty replied that the assets were valued daily and then balanced. However, they didn’t discover until after the 8^th October some of the equities had been removed without their knowledge.

Had the FSC been contacted on the 6^th October when they had had difficulty in acquiring funds from London, inquired Mr Houghton.

The answered appeared to be the situation was just being monitored as it was thought they were in a good position, with strong liquidity and no need to fight London and break the contract.

At this point Mr Davies interjected, saying they were assessing the liquidity position every evening.

Mr Houghton wanted clarification about the decision to inform customers they would not be allowed to break their contracts, even with a penalty; to which Mr Doherty replied they were only doing the same as the Derbyshire had done; and at the end of the day it was a straightforward “commercial decision” - but to answer Mr Houghton’s previous question, no they hadn’t contacted the FSC.

Had they been in talks with other banks at this time, inquired Mr Watterson.

Yes they had, and equally other banks had had some issues, particularly as people were switching their money around, he said. He added possibly 1 of every 5 institutions was doing the same as them at the time.

Were the directors encouraged to keep with the bank, asked Mr Houghton?

No, said Mr Doherty.

Were they offered special terms, came the follow up question; to which Mr Doherty again replied, no.

Was anything done differently was the final part of the trilogy of questions; and yet again the answer was simply no.

Mr Houghton brought up the issue of the (claimed) redacted minutes issued to Mr Cashen, and pointed out the examples of the minutes promised at the last hearing had not yet materialized; and wondered if Mr Cashen had any comment to make.

Mr Cashen said he had raised the matter with the Chairman but she was reluctant to release them.

Mr Hougton pointed out he had then at home; but Mr Cashen replied, “Not any more”. He explained once board members were satisfied with the drafts they got rid of them and the draft minutes approved by the Board became the minutes.

Mr Houghton sought assurance the drafts he received were redacted; to which Mr Cashen replied, yes.

Mr Houghton just said they just wanted to see how they had been redacted; and Mr Cashen said the Committee were invited to visit the FSC where they would be shown them and given an explanation. Mr Houghton didn’t seem too pleased by this but let the matter ride.

Mr Houghton then turned his attentions to Mr Davies and said he needed to ask him about his withdrawal of funds from the bank.

Mr Davies said all his funds were on call and none was on fixed deposit. He added, perhaps a little less than convincingly, that he had no reason to think there was a problem with the bank at the time he withdrew the money.

Bringing the session towards a conclusion, Mr Watterson invited Roger Rawcliffe, who is one of the two advisors to the Committee, to ask a question.

 He asked how the Directors got their information about what was going on; to which Mr Gelling replied, “Long hours”.

Mr Watterson, in winding up, put to Mr Doherty if they had any concerns about the documents the Committee intend to publish on their website, let him know and they would take a look at them.

Mr Doherty made his final contribution by saying there have been some calls by depositors that when the bank’s rating had dropped the directors should have withdrawn the money then. However, he wished to point out the history of the bank’s rating, which was related to long term deposits, whereas all of their deposits were short term; and so they would have to look at Moody’s and Fitch’s ratings. In September 2008 Fitch had only downgraded the bank a bit, but it was still a good rating; whilst Moody’s was still at the highest.

Mr Watterson responded by saying the UK Treasury Select Committee had touched upon this area and did have some issues with ratings - just to put the matter into context.

He then asked if they had anything to add to which Mr Gelling replied no thanks.