Critical Evaluation of Anglo Irish Bank's Insolvency Due to Financial Crisis

Assessment task 1: Individual essay

Introduction
This essay has been undertaken for presenting a critical evaluation of a public listed
company that has suffered insolvency due to financial crisis. In this context, the essay in
particular discusses about the selected company’s history. Initial success drivers, major changes
in its structure, generally accepted reason that caused its failure, the social impact of the failure
and at lastly a brief summary of the lessons learned. The company selected in this context is
Anglo Irish Bank that has merged with the Irish nationwide building society in the year 2011
after nationalization in the year 2009.
Brief History of the Company
Anglo Irish Bank was an Irish bank that has ceased its operations after nationalization in
the year 2009. It was established in the year 1964 headquartered in Dublin in Ireland. The
banking corporation was one of the recognized banks within Ireland that mainly dealt in the
business of commercial banking. The bank however had only limited presence within the major
Irish cities and also have divisions within wealth management and treasury units. The banking
corporation operates mainly within the cities of Austria, Switzerland, the UK and the US. The
bank has a history of achieving high success in the initial year of its establishment. The
acquisition policy adopted by the bank in the year 1988 supported its plan of business expansion
and growth. As a result of its policy of acquisition, the banking corporation acquired Irish Bank,
Royal Trust Bank, Credit Lyonnais and many other banking corporations (Byrne, 2015). This
enabled it to gain a dominant position within the banking sector at an international level as it
started conducting its operations within the developed economies such as the US and the UK.
The acquisition policy of the bank has caused it to gain the position of one of the largest bank
within Ireland (Kelly, 2014).
The banking corporation decline began in the year 2008 when the downturn in the Irish
property market has started. The bank has high exposure to property lending and has provided
large amount of loans to the property developers. Thus, the collapse of the property market had a
large negative impact on the property market. The loan fraud was identified within the bank
when its chairman has admitted to have a total loan of about £ 87 million and also resigned from
his position. The resignation was followed by that of its non-executive director beginning its
collapse (Neill, 2011). The Irish government in the year 2009 after consultation with the Board
of the bank decided to nationalize the bank so that it can be taken into the public ownership. The
Anglo Irish Bank Corporation Act was passed in the year 2009 for transferring the ownership of
the bank to the minister of finance. The Dublin and London Stock Exchange has stopped trading
in the Anglo Irish shares. The bank has undergone a merger with the Irish Nationwide Building
Society and this lead to establishment of a new company known as Irish Bank Resolution
Corporation in the year 2009 (Carswell, 2013).
Key Initial Success Drivers, Financial Milestones or Achievements

The bank after its initial years of establishment has enjoyed larger success with
recognizing its presence in the international market. The acquisition and the expansion policies
of the bank enabled it to achieve growth and development within the global banking sector. The
shareholders of the banking corporation also received high dividends. The bank’s profits have
risen by 3.4 per cent and shareholders receive an increase of about 22.5 per cent in the dividend
payment in the year 2003. The executive’s and the director’s were overwhelmed by the bank’s
performance due to large rise in the dividend and healthy financial performance. The bank’s
share prices was increased by about 60 per cent in the year 2004 and this lead the bank in making
it a high performance stock in Ireland. The banking corporation was recognized to be one of the
largest bank within England in the year 2003 supported by its healthy financial performance and
increased share prices (Anglo Irish Bank meeting full of happy investors, 2003). The key
milestones in the banking success that enabled it to acquire a competitive position within the
global financial service industry can be stated as follows:
 The bank has acquired the Irish Bank of Commerce in the year 1988
 It has also acquired Royal Trust Bank in the year 1995
 It acquired Ansbacher Bankers, Credit Lyonnais and Smurfit Paribas Bank also in the
consecutive years
The major financial awards that have been received by the Anglo Irish Bank before its collapse
are as follows:
 It has been regarded as the world’ top performing bank over the past five years in the
year 2006
 The share price of the bank has increased with more than 300pc from the financial year
period 2001-2005
 It has also been awarded the status of being the most high profile and searched after bank
in the financial services industry
 The bank in the year 2008 has also been awarded for maintaining the best investor
relations within the banking sector
Major Changes in the Corporate Structure
The financial crisis in the Irish property market resulted in causing major changes in the
corporate structure of the bank. The identification of the unethical and illegal business activities
within the bank carried out by its CEO, Sean FitzPatrick, was identified after the occurrence of
the financial crisis. It was identified that Sean FitzPatrick has adopted the use of funds from the
banks for taking personal loans. The information about such loans was concealed from the
regulators and there was shifted to another bank on a temporary basis during the auditing period.
The identification of such a crisis within the banking corporation resulted in causing major
changes in its corporate structure. The increased scrutiny of the bank has caused the CEO to
admit of hiding such large amount of personal loans from the general public and he has resigned