Karl Whelan has posted on this question, querying the non-removal of Anglo management after the guarantee at end-September 2008. One rather strange manouevre has been commented on by Cliff Taylor in the Sunday Business Post (I can’t locate the piece: Cliff writes a lot, for an editor).
What appears to have happened is this. In May 2008, Anglo borrowed in Yen to finance an asset position in £ Sterling, and ran the position uncovered. There was some tax angle. Yen interest rates were well below sterling rates. By end-September, the Yen/Sterling exchange rate had moved adversely but not disastrously. But the movement accelerated and the deal was unwound at substantial cost a few months later. The following is from Anglo’s 2009 accounts, page 62.
Included within foreign exchange contracts is the impact of a non-trading Japanese Yen financing arrangement, which was first
entered into in May 2008 and ended during December 2008 and January 2009. The financing arrangement was intended to
reduce the Group’s overall net cost of funding and was structured in a manner which was anticipated to result in no net after
tax loss for the Group arising from currency fluctuations. In the six months to 31 March 2009 the arrangement resulted in a pretax
loss of €181m but an after tax benefit of €17m. However, due to the significant operating losses incurred by the Group in
the nine months to 31 December 2009, €97m of taxation benefit has not been recognised resulting in a pre-tax loss for the
fifteen month period to 31 December 2009 of €181m (30 September 2008: €31m) and an after tax cost of €80m
(30 September 2008: gain of €6m). The potential benefit of these losses carried forward is a component of unrecognised
deferred tax assets in note 35.
Not being an accountant, I am unable to translate this into English, but it looks like an uncovered foreign exchange carry-trade punt that went wrong. Of the €181m hit, €150m occurred after end-September 2008, at which point there could have been no plausible expectation of profits to shelter, assuming that the tax angle is, or was, serious. Thus Anglo would appear to have run a naked forex position post the guarantee, and dropped €150 m in the process. No doubt there is a more detailed explanation to be given, but it sure looks like gambling for redemption. On October 5th. 2008, I wrote the following in a piece in the SBP:
‘All six of the domestic banks have been given an identical vote of confidence and none has been allowed to fail. This is both unjust and potentially costly, since any bank close to insolvency now has an incentive to throw more dice, without capital at risk’.
The Commission of Inquiry will have a long agenda, but this costly Anglo forex manouevre deserves a slot somewhere.