Annual Report & Accounts 2009 - Anglo Irish Bank

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Notes to the financial statements Index to the notes to the financial statements Note Page 1 General information and accounting policies 45 2 Segmental reporting 59 3 Net interest income 61 4 Fee and commission income and expense 62 5 Net trading (expense)/income 62 6 Financial assets designated at fair value 63 7 Gains on repurchase of financial liabilities measured at amortised cost 63 8 Other operating income 63 9 Administrative expenses 64 10 Share-based payment schemes 65 11 Retirement benefits 69 12 Auditors' remuneration (including irrecoverable VAT) 73 13 Provisions for impairment 74 14 Profit on disposal of businesses 75 15 Taxation 76 16 (Loss)/profit attributable to owner of the parent 77 17 Non-controlling interests 77 18 Distributions on equity shares 77 19 Cash and balances with central banks 77 20 Financial assets at fair value through profit or loss 78 21 Derivative financial instruments 79 22 Loans and advances to banks 82 23 Assets classified as held for sale 83 24 National Asset Management Agency ('NAMA') 83 25 Amount due from Shareholder 85 26 Available-for-sale financial assets 86 27 Loans and advances to customers 88 28 Leasing 92 29 Interests in associate and joint ventures 93 30 Investments in Group undertakings 95 31 Intangible assets 97 32 Investment property - held on own account 98 33 Investment property - held in respect of liabilities to customers under investment contracts 98 34 Property, plant and equipment 99 35 Deferred taxation 101 36 Other assets 101 37 Deposits from banks 102 38 Customer accounts 102 39 Debt securities in issue 103 40 Liabilities to customers under investment contracts 103 41 Other liabilities 104 42 Subordinated liabilities and other capital instruments 105 43 Share capital 108 44 Capital reserve 109 45 Other reserves 109 46 Non-controlling interests 110 47 Income tax effects relating to comprehensive income 111 48 Treasury shares 111 49 Contingent liabilities, commitments and other contingencies 112 50 Statement of cash flows 113 51 Risk management and control 114 52 Financial instruments 131 53 Capital resources 140 54 Report on Directors' remuneration and interests 144 55 Related party transactions 150 56 Parent Bank information on credit risk 165 57 Trust activities 173 58 Events after the reporting period 174 59 Approval of financial statements 174 44
1. General information and accounting policies The principal accounting policies that the Group applied in preparing its financial statements for the period ended 31 December 2009 are set out below. 1.1 General information Anglo Irish Bank Corporation Limited ('the Bank') and its subsidiaries (collectively, 'the Group') provide banking services in three core areas: business lending, treasury and private banking. The Bank is a limited liability company incorporated and domiciled in Ireland. Its registered office is at Stephen Court, 18/21 St. Stephen's Green, Dublin 2, Ireland. Before the Anglo Irish Bank Corporation Act, 2009 became law on 21 January 2009, the Bank had a primary listing on the Irish Stock Exchange. On the same date the Bank was reregistered as a private limited company and its name was changed from Anglo Irish Bank Corporation plc to Anglo Irish Bank Corporation Limited. The collapse of Lehman Brothers in mid September 2008 and the unprecedented events in subsequent weeks led to intense turmoil in global financial markets. The resultant stress on all Irish banks' funding led to the Irish Government's decision on 30 September 2008 to introduce a guarantee scheme to stabilise the banking sector. On 24 October 2008 the Group executed the necessary documentation to participate in this scheme. Under the scheme the Irish Government has guaranteed all deposits and other specified liabilities of certain credit institutions operating in Ireland until 29 September 2010. This Government guarantee covers all relevant liabilities of the Bank (Irish, UK, Jersey, Austrian and German branches) and also Anglo Irish Bank Corporation (International) PLC (the Bank's Isle of Man subsidiary). On 21 December 2008 the Minister for Finance announced a framework to provide additional capital to certain Irish credit institutions including the Bank. The Government's proposed investment of €1.5bn in the Bank was to be in the form of perpetual preference shares ranking pari passu to ordinary share capital on liquidation. The Bank's funding position weakened in late 2008 as a result of reputational damage relating to Directors' loans and adverse ratings actions which further weakened the Bank's competitive position in funding markets at a time when overall market sentiment was negative. On 15 January 2009 the Government announced that it had decided not to proceed with its original recapitalisation proposal and advised of its intention to take the Bank into State ownership. The Bank's shares were subsequently suspended from trading on the Irish and London Stock Exchanges on 16 January 2009. The Anglo Irish Bank Corporation Act, 2009, which provided for the transfer of all the shares of the Bank to the Minister for Finance, was enacted under Irish law on 21 January 2009. As a result of the losses incurred during the period there has been a significant deterioration in the Bank’s regulatory capital base. In order to protect the capital position of the Group the Minister for Finance provided €4bn in capital between June and September 2009. A liability management exercise was also undertaken in August 2009 and €1.8bn of equity was realised on the buyback, at a significant discount, of subordinated liabilities and other capital instruments. In April 2009 the Irish Government announced the establishment of the National Asset Management Agency (‘NAMA’) for the purposes of acquiring certain assets from Irish banks, holding, managing and realising those assets and facilitating the restructuring of credit institutions of systemic importance to the Irish economy. On 9 February 2010, the Bank applied to be designated as a participating institution in NAMA. This application was accepted by the Minister for Finance on 12 February 2010 and the Bank was designated a participating institution. In November 2009 the Bank submitted a draft restructuring plan to the European Commission (‘EC’). The leadership team is currently engaged in discussions with the EC and the Department of Finance regarding various aspects of the plan with a view to revising and updating it. In December 2009, the Minister committed to safeguard the Bank’s regulatory capital position which resulted in the issuance of a promissory note for €8.3bn on 31 March 2010. 1.2 Basis of preparation Both the consolidated and parent Bank's financial statements comply with International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU') and applicable at 31 December 2009. The financial statements also comply with the requirements of relevant Irish legislation including the Companies Acts, 1963 to 2009, the Asset Covered Securities Acts, 2001 and 2007 and the European Communities (Credit Institutions: Accounts) Regulations, 1992 as amended by the European Communities (International Financial Reporting Standards and Miscellaneous Amendments) Regulations, 2005. In line with the financial reporting periods of other commercial State bodies, the Group has changed its reporting period end from 30 September to 31 December. Accordingly, the consolidated and parent Bank financial statements include 15 months of operations and cash flows to 31 December 2009, and therefore are not directly comparable to the amounts disclosed for the prior period. The financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain assets and liabilities to the extent required or permitted under accounting standards as set out in the relevant accounting policies. They are presented in euro, rounded to the nearest million. Anglo Irish Bank Annual Report & Accounts 2009 45
Page 1 and 2: Annual Report & Accounts 2009
Page 3 and 4: Contents Page Chairman’s statemen
Page 5 and 6: Legacy matters The Bank is continui
Page 7 and 8: Jim Brydie was appointed Head of Gr
Page 9 and 10: Business review This business revie
Page 11 and 12: Divisional lending balances by sect
Page 13 and 14: holdings, reduced investment cash f
Page 15 and 16: 30 September 2008. Average total cu
Page 17 and 18: Income statement - treasury impairm
Page 19 and 20: to acquire these assets they are in
Page 21 and 22: Board of Directors Donal O’Connor
Page 23 and 24: In keeping with our environmental p
Page 25 and 26: Principal risks and uncertainties T
Page 27 and 28: Credit risk Credit risk is the risk
Page 30 and 31: Report of the Directors The Directo
Page 32 and 33: Corporate governance statement On 1
Page 34 and 35: Corporate governance statement cont
Page 36 and 37: Independent Auditors' report to the
Page 38 and 39: Consolidated income statement For t
Page 40 and 41: Consolidated statement of financial
Page 42 and 43: Consolidated statement of changes i
Page 44 and 45: Statement of cash flows For the 15
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Supplementary information Consolida
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www.angloirishbank.com Anglo Irish
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Annual Report & Accounts 2009 - Anglo Irish Bank

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