George Osborne has been urged to investigate whether Bank of Ireland’s UK arm, which manages billions of pounds of savings for the Post Office, is a ‘sham’ bank covertly run from Dublin.
The startling concerns are laid out in a letter from Lord Ahmed of Rotherham to the Chancellor, in which he raises fears that Bank of Ireland hoodwinked British regulators into awarding it a UK banking licence.
The licence means that if the bank went under, the British government would be required to bail out its UK savers at the Post Office, up to a maximum of £85,000 per customer.
The Ahmed letter, obtained by the Daily Mail, cites a ‘senior’ whistleblower at the bank who alleges that the Financial Services Authority was duped into believing that the British operation was independent.
‘A key understanding from the FSA before granting the licence was that the UK bank was not a “sham” and was not in effect being run from Dublin,’ Lord Ahmed said.
The agreement saw the FSA order Bank of Ireland to appoint a UK chief executive and board, independent from its Irish parent company.
But Lord Ahmed alleged in his letter to the Chancellor that ‘due to internal rivalries/politics this original plan has been compromised’.
‘It is apparently common knowledge internally among staff that the UK chief executive has no power, is completely sidelined, and in effect a puppet,’ the letter added.
The issue of who controls the London and Belfast operations is critical, as the Bank of Ireland could soon be nationalised by the Dublin government, due to its escalating losses on property loans.
The letter warns that the non- Irish businesses are ‘covertly’ run from Dublin by an Irish executive who is a close friend of Dublin finance minister Michael Noonan and is also said to have the ear of Prime Minister Enda Kenny.
There is no suggestion however that they are involved in any collusion. Lord Ahmed’s concerns are potentially explosive, because they raise the question of whether the Bank of Ireland disingenuously engineered a situation under which it is partially underwritten by UK taxpayers.
According to high-level sources within the bank, the ownership of some £10bn held in Post Office savings accounts was a key factor in shoring up its balance sheet and preventing nationalisation.
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