Anglo Irish Bank Price Waterhouse Coopers Report

8/14/2019 Anglo Irish Bank Price Waterhouse Coopers Report

1/47

Transaction Services

20 February 2009

Project Atlas - Anglo Irish Bank Corporation plc

Summary Report Extracts

Strictly Private and Confidential


2/47

Irish Financial Services Regulatory Authority (IFSRA)College GreenDublin 2

20 February 2009

Ladies and Gentlemen

This report prepared at your request is a summary of three reports on Anglo Irish Bank Corporation plc (Anglo or the Bank) (the Summary Report),comprising 294 pages, prepared by PwC dated 27 September, 27 November and 17 December 2008 (the PwC Reports).

The PwC Reports were prepared in accordance with your specific instructions, which required us to focus solely on the largest customer loan exposures (byregulatory grouping) and the main treasury exposures of Anglo as at 31 August 2008 and 30 September 2008 in order to assist you in your review of thefinancial and capital position of Anglo. These instructions were confirmed in our contracts dated 18 September, 9 October and 25 November 2008 (the

Instructions). The PwC Reports were prepared for the purposes set out in the Instructions and for no other purpose.

We draw your attention to important comments regarding the scope and process of our work, immediately following this letter. We have not sought to updateany of our findings since the completion of our fieldwork on 10 December 2008.

In particular you have requested that this Summary Report excludes all commercially sensitive information on individual bank customers or loan balances,which remains confidential. Disclosure of this information has already been made to the Board of IFSRA, the National Treasury Management Agency and theDepartment of Finance. Unauthorised disclosure of any information contained in the PwC Reports remains prohibited under Section 33AK of the Central

Bank Act 1942 and the Data Protection Acts 1988 and 2003 (together the Acts) . By its nature this is a significantly summarised report which excludes largeelements of the PwC Reports, particularly those specific to individual bank customers or loans, due both to their confidential nature and our continuingobligations under the Acts.

As a result of the previous two paragraphs, and given that much of this Summary Report has been extracted without adjustment from the original PwCReports, some of the information presented in this Summary Report may be out of context or out of date.

Except as described in the Instructions, we will not accept any duty of care (whether in contract, tort or otherwise) to any other person or body other than you.

Yours faithfully

PricewaterhouseCoopers

PricewaterhouseCoopersOne Spencer Dock

North Wall QuayDublin 1Telephone +353 (0) 1 792 6000

Facsimile +353 (0) 1 792 6200

Ronan Murphy Olwyn Alexander Brian Bergin Alan Bigley Sean Brodie Paraic Burke Damian Byrne Pat Candon Mark Carter John Casey Mary Cleary Siobhn Collier Tom Corbett Andrew Craig Thrse Cregg Garrett Cronin Richard Day Fona de Brca Gearid Deegan Jean Delaney David DevlinLiam Diamond John Dillon Ronan Doyle John Dunne Kevin Egan Enda Faughnan John Fay Martin Freyne Ronan Furlong Denis Harrington Teresa Harrington Alisa Hayden Paul Hennessy Mary Honohan Ken Johnson Patricia Johnson Paraic Joyce Andrea Kelly Ciaran Kelly Colm Kelly Joanne P. KellyJohn Kelly Susan Kilty Anita Kissane Chand Kohli John Loughlin Vincent MacMahon Tom McCarthy Teresa McColgan Dervla McCormack Enda McDonagh Caroline McDonnell Jim McDonnell John McDonnell Ivan McLoughlin James McNally Ronan MacNioclais Robin Menzies Brian Neilan Damian Neylin

Andy O'Callaghan Ann O'Connell Jonathan O'Connell Carmel O'Connor Denis O'Connor Marie O'Connor Paul O'Connor Terry O'Driscoll Mary O'Hara Irene OKeeffe John O'Leary Dave O'Malley Garvan O'Neill Michael O'Neill Tim O'Rahilly Billy O'Riordan Feargal O'Rourke Joe O'Shea Ken OwensGeorge Reddin Dermot Reilly Garvan Ryle Emma Scott Bob Semple Mike Sullivan Billy Sweetman Paul Tuite David Tynan Joe Tynan Pat Wall Aidan Walsh Tony Weldon

Also at Cork, Galway, Kilkenny, Limerick, Waterford and Wexford

PricewaterhouseCoopers is authorised by the Institute of Chartered Accountants in Ireland to carry on investment business.


3/47

Table of Contents

Page

1 Scope of Work 1

2 Financial Overview 10

3 Summary Findings (Excluding Confidential Information) 16

3.1 Phase I Extracts (27 September 2008) 17

3.2 Phase II Extracts (27 November 2008) 20

3.3 Phase III Extracts (17 December 2008) 31

3.4 Loan Reviews 33

3.5 Capital Adequacy and Stress Tests 35

3.6 Money Market Exposures 39

Appendices

1 Contract 41

2 Glossary 43


4/47


Section 1

Scope of Work


5/47

Project Atlas - Anglo Irish Bank Corporation plc Summary Report Extracts

Purpose of PwC reports and exclusion of customer and other information (1 of 2)

Purpose of PwC Reports The PwC Reports were prepared to assist IFSRA in its review of the financial and capital position of Anglo and for noother purpose.

The PwC Reports were prepared using financial and loan portfolio information supplied by Anglos management which

was not subject to audit by PwC. We also had access to senior executives at Anglo. The audit is a separate processunder statute which we understand will be completed in the week ending 20 February 2009. PwC are not Anglosstatutory auditors. We have had no access to the work undertaken by the auditors or their conclusions.

Our work was completed in accordance with the specific terms of reference set out in the Instructions.

Customer information This Summary Report excludes specific customer related, forward looking and other information for the following

reasons: Under the terms of the Data Protection Acts 1988 and 2003 (DPA) there is a requirement not to disclose personalinformation in relation to Anglos customers and counterparties. We have been advised that there is no clear means inthe DPA to permit provision by PwC of a report to the Minister if the report contains personal data on individuals;

Even if disguised, to reveal customer information or information through which customers could be identified wouldbe a breach of the Central Bank Acts pertaining to customer confidentiality and banking secrecy; and Anglo has public debt and we have been advised that there is a risk of a breach of law if forward looking information

were to be publically disclosed without being subject to a detailed verification process.

The results of the work on the value of property held as security for loans has been excluded from this SummaryReport on the grounds of customer confidentiality and commercial sensitivities.

The vast bulk of the PwC Reports was a description of customers loan exposures, none of which is included in thisSummary Report. The descriptions of customers included a summary of various loans, partnerships, underlyingassets, security etc.

2

Section 1 - Scope of Work


6/47


Purpose of PwC reports and exclusion of customer and other information (2 of 2)

Completion of work We have not carried out any work or made any enquiries of Anglos management since 10 December 2008 being thedate on which we completed our fieldwork on Phase III. The PwC Reports do not incorporate the effects, if any, ofevents and circumstances which may have occurred or information which may have come to light subsequent to that

date. We make no representation as to whether, had we carried out such work or m ade such enquiries, there wouldhave been a material effect on the PwC Reports. Further, we have no obligation to update, and we will not update, thePwC Reports nor do we have any obligation to notify you if any matters come to our attention which might affect thecontinuing validity of our comments or conclusions.

3



7/47


Scope of work and process undertaken

Financial Statements The management accounts for the year ended 30 September 2008 were in the process of being finalised, including thefinal review of advances and treasury assets for impairments at the dates of our reviews. The 2008 final audit was stillin progress at the time of drafting this report. As such the final reported 2008 position could change from that reported

to us by management.

Report issuance dates The PwC Reports were issued to IFSRA on the following dates:

- Phase I - issued on 27 September 2008

- Phase II - issued on 27 November 2008

- Phase III - issued on 17 December 2008

In addition working drafts were issued on various other dates during the period from the commencement of our workto 17 December 2008. We also issued a supplemental report incorporating the work of the independent propertyvaluer. We have not sought to update this Summary Report for any events since the date of completion of our

fieldwork (10 December 2008).

PwC Risks/Observations Where we have made comments and observations about possible asset write downs and scenarios, these are for

indicative purposes only. We have not sought to mark to market property assets in the present economic environment,(where the market for property assets is largely illiquid); in that context it is difficult to forecast the out-turn of anyimmediate short term assets sales or asset developments. See also page 9 Independent Property Valuation.

Because events and circumstances frequently do not occur as expected, there will always be differences betweenpredicted and actual results, and those differences may be material.

Management representations We showed working drafts of the original PwC Reports to, certain members of senior management, who have

confirmed that, to the best of their knowledge and belief, they did not contain any material error of fact, there had beenno material omission and that they fairly set out the recent results and state of affairs of the Group. To the extent thatwe considered appropriate, we have incorporated their comments in the original PwC Reports. Management did not

concur with all of our conclusions in relation to loan impairments and other matters.

4



8/47


Scope of work and review process undertaken

Review Process Phase I of our work was undertaken in a nine day period commencing on 18 September 2008. We visited theheadquarters of the Bank in St. Stephens Green, Dublin 2 but none of the other lending locations, including the UKand USA. We had access to the CEO, CFO, MD Ireland, Head of Risk Management, Senior Manager Risk

Management, Director of Group Treasury, Head of Liquidity and Market Risk Manager.

Phase II of our work commenced on 14 October 2008. We visited the headquarters of the Bank in St. StephensGreen, Dublin 2 but none of the other lending locations, including the UK and USA. We held meetings with senior UK

lenders in Dublin and US senior management by video conference. We had open access to all senior management,Lending, Risk and Finance staff including the CEO, the CFO and the Director of Lending and various other members ofsenior management including the key relationship lending managers.

Phase III of our work commenced on 24 November 2008. We visited the headquarters of the Bank in St. StephensGreen, Dublin 2 and the Banks USA head office in Boston. We held meetings with senior UK lenders in Dublin. Wehad open access to all senior management, Lending, Risk and Finance staff.

Access to information (Phase I) Our information was obtained primarily from Anglos August 2008 reporting pack and discussions with management.In addition, we reviewed a sample of Anglo credit reviews (concentrating on the main customer exposures by size) andliquidity reports which were prepared in September 2008.

Access to information (Phases IIand III)

Our information on the customer loan exposures was obtained primarily from credit review sheets prepared bymanagement, credit files and discussions with senior relationship lending underwriters and senior central credit riskpersonnel. In the time available and due to the extensive documentation we have not conducted a detailed review of

all documents on the credit files.

Complexity of business The Group is a complex business which produces a substantial amount of financial information for internal and entity

reporting requirements. As a result of the time available to undertake our review and complete our reports, we werenot able to review all the relevant financial and management information available at 31 August 2008 (Phase I) and 30September 2008 (Phases II and III).

5



9/47


Scope of work and review process undertaken Phase I (Report of 27 September2008)

Limited scope procedures -Phase I

1. Read minutes of the following groups for the period from 1 January 2008 to 19 September 2008: The Board ofDirectors, The Audit Committee and The Asset and Liability Committee.

2. Read the management accounts for the eleven months ended 31 August 2008 and the published interim

unaudited accounts for the six months ended 31 March 2008.3. Obtain a sectoral breakdown by ranking for Customer Loan Balances (Ireland) as at 30 June 2008.4. Obtain an analysis of captions included in the Group balance sheet as at 31 August 2008 (Loans and

advances to banks, loans and advances to customers).

5. Obtain a listing of the main customer loan balances as at 31 August 2008 (Top 50 for Ireland and UK, Top 20for North America).

6. Obtain a listing of the customer loan balances over 2 million impaired as at 31 August 2008.

7. Obtain a listing of the Watch cases over 5 million as at 31 August 2008.8. Obtain a listing of the Top 10 Land and Development Exposures as at 30 June 2008.9. Select a sample of the customer loan balances as at 31 August 2008 (to cover the large exposures, balances

on the watch list) and review the loan files. We will discuss the contents of these files with members of

management.10. Obtain analysis of customer accounts, deposits from banks and debt securities in issue as at 31 August 2008.11. Obtain an overview of the credit risk function (loan application processes, management reporting etc).12. Obtain details of the impairment/default policies.

13. Review the policy in respect of the use of derivatives and the basis of valuing derivatives.14. Obtain analysis of the Banking Book Assets at 31 August 2008 and comment on the valuation basis.15. Review and comment on the Detailed Nostro Cashflow Projections for the period from 18 September 2008.

16. Review and comment on the Regulatory Liquidity Mismatch (internal report) as at 18 September 2008.17. Review the Group Funding Report as at 18 September 2008.

18. Discuss the above information and obtain a briefing from senior management or their assessment of thecurrent financial and liquidity position of Anglo.

Significant scope matters (PhaseI)

We have undertaken only a high level review of the 31 August 2008 balance sheet. We have not been able in the timeavailable to us to check any of the underlying documentation, the adequacy of security, valuation reporting etc. In

addition, we have summarised the profit and loss account to 31 August 2008 but have not had detailed discussionswith management on its components and the reasons for key movements.

6



10/47


Scope of work and review process undertaken Phase II (Report of 27 November2008) (Page 1 of 2)

Limited scope procedures -Phase II

1. Read the management accounts for the most recently available date, the published interim unaudited accountsfor the most recent published six months accounting period and latest available annual report.

2. Obtain an analysis of captions included in the Group balance sheet as at the most recent management

accounts date (Loans and advances to customers, securities etc.).3. Obtain a sectoral breakdown of customer loan balances as at 30 September 2008 with an impairment

analysis.4. Obtain a geographic breakdown of customer loan balances as at 30 September 2008.

5. Obtain an analysis of customer loan balances by credit grade as at 30 September 2008. If the institutionoperates on a divisional basis or has differentiated asset classes we will obtain an analysis by materialportfolios.

6. Obtain an analysis of customer arrears as at 30 September 2008.7. Obtain a listing of the top 50 customer loan balances as at 30 September 2008.8. Obtain a listing of the impaired customer loan balances over 2.0 million as at 30 September 2008.9. Obtain a listing of the Watch cases over 5.0 million as at 30 September 2008.

10. Obtain a listing of the Top 20 Land and Development Exposure as at 30 September 2008.11. Obtain total land and development exposure split between unzoned land, zoned land without planning

permission, land with planning permission, construction and other developments under construction.12. From the customer loan balances as at 30 September 2008 (to cover the top 20 large exposures and top 20

land and development exposures) obtain and review the loan files and discuss the contents of these files andsupporting documentation with members of management.

13. Obtain an overview of the credit risk function (including credit policy document, credit grading definitions, loan

application processes, management reporting etc.).14. Obtain details of the impairment/default policies.

15. Obtain details of the policy over the use of derivatives and the basis of valuing derivatives.16. Obtain a list of all derivatives with a notional principal in excess of 20 million.

17. Obtain a listing of all financial assets with a carrying value > 20 million, excluding loans to customers, at 30September 2008 classified as Held to Maturity, Loans and Receivables, Trading or at Fair Value through Profitand Loss Account. Obtain an analysis of exposure to monoline insurers at 30 September 2008 as part of this

analysis.

7



11/47


Scope of work and process undertaken Phase II (Report of 27 November 2008)(Page 2 of 2)

Significant scope matters (Phase

II)

We point out that, our Phase II work did not include a review of cases outside the 62 large cases included in our loan

sample. Smaller loans, that is, approximately less than

300 million in size for investment loans and

150 million fordevelopment loans may have different characteristics and risk factors that may make them higher risk in terms of theirpotential for impairment. We do not comment on such matters in this report.

We have not been able in the time available to us to check any of the underlying documentation, the adequacy ofsecurity, valuation reporting etc.

Limited scope procedures -Phase II (Contd.)

18. Obtain an analysis of the Treasury/Banking Book Assets at 30 September 2008 and comment on the valuationbasis, mark to market losses and impairments in the year to date for each major class of asset held.

19. Obtain the top 10 exposures to financial institutions (with balance, credit rating of counterparty and limit) at 30

September 2008.20. Obtain the Banks projected capital and capital adequacy position for the next three years and the impact of

management scenarios in relation to variations in impairment charges and other relevant factors.21. Discuss the above information and obtain a briefing from senior management of their assessment of the current

financial and capital position of the institution.

8



12/47


Scope of work and review process undertaken Phase III (Report of 17 December2008)

Limited scope procedures -Phase III

Loan ReviewsWe obtained a listing of the top 400 customer exposures as at 31 October 2008. (The top 20 investment exposures,top 20 land and development exposures and 22 other exposures were reviewed as part of our work in Project Atlas -

Phase II). We have selected the next 40 exposures with the highest Land and Development loan balances to form oursample.

We reviewed this additional sample (i.e. next 40 largest land and development loans) as set out below:

- Drawn versus committed facilities- Overview of security held, location etc.- Date and output of most recent valuations

- Other KPI (roll-up of interest, rollover date etc.)

Independent Property ValuationThe scope of work for the independent valuation agent was to:

1. Provide a macro assessment of the key markets that each institution operates in for both the residential loan andcommercial loan portfolios.2. Focus on the problem Commercial Real Estate loans and carry out a desk top review of the Banks valuation of theunderlying properties based on a medium term (3 to 5 years) view of potential future value.

3. Assess the valuation methodology used by each Institution.

Significant scope matters

Phase III

We point out that, our work did not include a review of cases outside the 102 cases included in our combined loan

sample. Smaller loans, that is, approximately less than 330 million in size for investment loans and 64 million fordevelopment loans may have different characteristics and risk factors that may make them higher risk in terms of their

potential for impairment. We do not comment on such matters in this report.

We have not been able in the time available to us to check any of the underlying documentation, the adequacy ofsecurity, valuation reporting etc.

9



13/47


Section 2

Financial Overview


14/47


The Banks profitability has developed strongly over the last 8 years, driven by lendingadvances growth and a low cost to income ratio approximately one quarter of the loanbook at 30 September 2008 was development based

11

Loan Book - Origin ( millions)

12,843 5,497 1,339

43,585

21,354

9,412

Ireland UK (incl. Belfast) US

Devel Total

Geographical Split of Assets - 30 Se ptember 2008

44%

37%

13%

6%

Ireland UK US Europe / other

Historic Profitability - Profit Before Tax ( millions)

195 261347

504 615850

1,2431,485

2001 2002 2003 2004 2005 2006 2007 2008

Irish GAAP IFRS Pro Forma

*

* 2008 is after Treasury and specific lending impairments but before generalimpairments

Source: Annual reports and management estimate (2008)

Source: Management Information

Historic Total Assets ( billions)

15.8 19.425.5

34.349.6

73.3

96.7 101.3

2001 2002 2003 2004 2005 2006 2007 2008

Irish GAAP IFRS Pro Forma

Source: Annual reports and management estimate (2008)

Section 2 - Financial Overview


15/47


Draft management accounts to 30 September 2008 showed PBT of 0.8 billion for theyear then ended, 456 million lower than the prior year and 739 million lower thanbudget

12

Total income for the year 30 September 2008 was 2.0 billion,272.9 million higher than the prior year and 124.0 million lowerthan budget. The FY08 budget was completed in Summer 2007prior to the credit crunch.

The Irish Banking Division generated 1.1 billion or 54% of thetotal income. The average margin for the Irish Banking Divisionwas 2.23%.

The UK banking Division is the second largest division. Total

income from this Division amounted to circa 437 million or 21.6%for the year to 30 September 2008. This is 16% lower thanbudget. The UK Commercial market remains very challengingwith few transactions occurring, and management noted that it isvery hard to determine where valuations are at present. The

residential market in the UK is also showing low levels of activity.

Direct overheads of 343.1 million (for the year to 30 September2008) are 108.7 million lower than budget and 46.7 million lowerthan the prior year. Actual employee numbers are 1,777 versus1,798 in the prior year.

The draft management accounts to 30 September 2008 report

lending impairment charges of 720 million and treasuryimpairment charges of 154.8 million.

The profit on sale of Geneva (20 million) relates to the disposal ofthe wealth management division in Geneva.

in billions

Sep 08

Mngt

Sep 08

Budget

Sep 07

Actual

Income

Net interest 1,624.9 1,605.4 1,276.7

Other income 400.6 544.0 475.7

Total income 2,025.4 2,149.4 1,752.5Overheads

Direct overheads (343.1) (451.8) (389.8)

Group contribution before impairment 1,682.4 1,697.5 1,362.6

Banking impairment (720.1) (172.2) (75.1)

Treasury impairment (154.8) - (67.0)

Total impairment (874.9) (172.2) (142.1)

Gr oup cont ribut ion aft er impair ment 807.4 1,525.3 1,220.5

Profit on sale of Geneva 20.0 - 22.2

Reporting adjustment (41.2) - -

Statutory reported PBT 786.3 1,525.3 1,242.7

Source: Draft Group Management Ac counts Pack 30 September 2008

Group Profit and Loss Account



16/47


Summary balance sheet at 30 September 2008

13

Group Balance Sheet as at 30 September 2008

Sep 08 Aug 08 Sep 07

in billions Mngt Mngt Actual

Assets

Cash and balances with central bank 1.8 0.8 0.8

Derivative financial instruments 2.0 2.1 1.4

Fi na nci al a ss ets h el d a t fa ir va lu e th ro ug h P & L * 0 .7 0 .8 1 .1

Loans and advances to banks 14.0 7.5 12.1

Available-for-sale financial assets 8.2 8.3 12.5

Loans and advances to customers 72.2 71.9 65.9

Interests in joint ventures 0.3 0.3 0.1

Investment property* 1.9 1.9 2.1

Other assets 0.3 0.3 0.6

Total assets 101.3 93.9 96.7

Liabilities

Deposits from banks 20.5 15.1 7.6

Customer accounts 51.5 47.4 52.7

Debt securities in issue 17.3 18.5 23.6

Derivative financial instruments 1.5 1.5 1.2

L ia bi li ti es to c us to m ers u nd er i nve s tm e nt co ntr acts 1 .2 1 .3 1 .8

Current taxation 0.0 0.1 0.1

Other liabilties 0.2 0.1 0.2

Accruals and deferred income 0.1 0.2 0.2

S ub ord in ate d l ia bi li ti es & o th er ca pi ta l i ns tr um e nts 4 .9 5 .0 5 .3

Other liabilties 0.1 0.1 0.1

97.3 89.3 92.6

Share capital 0.1 0.1 0.1

Share premium account 1.2 1.2 1.1

Other reserves (0.5) (0.5) (0.1)

Retained profits 3.3 3.8 2.9

Shareholder s' funds including non-equity 4.1 4.6 4.1

Equity and non-equity minority interests 0.0 0.0 0.0

Total equity and liabilities 101.3 93.9 96.7

Source: Draft Group Management Ac counts Pack 30 September 2008

*The majorityo f these balances areheld on behalf of policyholders of Anglo Irish Assurance company

The table opposite sets out the unaudited management balancesheet for the Bank as at 30 September 2008 with comparatives.

The key focus of our work was on loans and advances tocustomers.



17/47


Retail, office and hotel investment account for 41% of the total Group loan book at 30September 2008. Retail, office and hotel investment account for 35% of the Irish book,47% of the UK book and 51% of the US book at 30 September 2008.

14

Group Loan book by sector

Retail development

2%

Mixed zoned land

3%

Residential investment

4%

Business banking5%

Other property investment

5%

Residential zoned land

6%

Pub investment

1%

Residential development

7%Office development

1%Mixed investment

7%

Hotel investment

10%

Hotel development

1%

Office investment

15%

Fund investment

1%

Retail investment

16%

Office zoned land

1%

Personal

5%

Leisure investment

3%

Industrial investment

2%

Retail zoned land

2%Unzoned land

2%

Mixed development

2%

Source: Management information



18/47


Investment lending accounted for 65% of the Banks loan book at 30 September 2008;Development & Land accounted for approximately a quarter of the total

15

Development

12.9%

Personal

5.0%

Investment

63.4%

Business Banking

5.0%

Land

13.9%

Source: Management information

Deve lopment Loan Book - 30 September 2008

in m illions Unzoned Zoned Full PP W IP Tota l

%of loan

book

Ireland 934 4,142 2,255 5,512 12,843 17.3%

UK 489 1,032 924 3,052 5,497 7.4%

Sub-total 1,423 5,174 3,179 8,564 18,340 24.7%

US 1,339 1.8%

Total Development Lending 19,679 26.5%

Investment Loan Book - 30 September 2008

in millions Hotel Mixed Office Resi Retail Other Total

%of loan

book

Ireland 3,923 2,179 5,230 1,308 6,102 5,230 23,972 32.2%

UK 2,349 1,495 3,203 854 4,484 3,844 16,229 21.8%

US 1,224 1,318 2,165 1,129 1,412 565 7,813 10.5%

Sub-total 7,496 4,992 10,598 3,291 11,998 9,639

Total Investment Lending 48,014 64.6%

This sectoral information was preliminary. The actual percentage ofDevelopment Loans at 30 September 2008 was 23%.



19/47


Section 3

Summary Findings (Excluding ConfidentialInformation)


20/47


Section 3.1

Phase I Extracts (27 September 2008)


21/47


Discussion Point Comments

Key findings for discussion Phase I (Page 1 of 2)

Trading Anglo generated PBT (after impairment charges) of 1.3 billion for the 11 months to 31 August 2008, up from 1.1billion in 2007. In the period from 31 March 2008 to 31 August 2008 loans and advances to customers increased from69.0 billion to 71.9 billion. Customers deposits declined during this period, with a further decline by 19 September2008. Debt securities issued also declined from 30 June 2008 to 31 August 2008.

18

Credit management Anglo operates a very centralised credit management, with short reporting lines and clear responsibilities.

Customer concentration As at 31 August 2008, the top 20 Irish regulatory groups represented 11.4 billion or 26.5% of the total Irish loan book.

The top 20 regulatory groups in the UK represented 8.3 billion, or 46% of the UK loan book, and the top 20 regulatorygroups in the US represented 3.0 billion or 32.4% of the US loan book. There are potentially substantial exposures toa number of key customers.

Guarantees and cross collateral From a review of the loan files it is evident that personal guarantees and net asset statements are obtained from

borrowers. While these show the borrowers net worth in a favourable position it must be noted that collateralvaluations, in particular property, in the current environment may be significantly lower and realising some of these

collateral assets may be difficult. However, given the satisfactory performance of the book to end of August 2008 it isnot anticipated by Anglo management that forced fire sales of collateral will occur.

Loan Quality According to August management information almost all of the Banks loan book, equating to c.99% of total customerloans, is considered by management to be performing. 0.6% of the Banks loan book is classified as impaired, butsignificant security is in place to minimise the Banks loss given default. 2.6% of the book is classified as Watch i.e.loans are performing but require intensive management to ensure that the Bank does not incur any loss. Loans that

are classified as Watch cases do not necessarily migrate to impaired.

Main Findings

Section 3.1 - Phase I Extracts (27 September 2008)


22/47


Discussion Point Comments

Key findings for discussion Phase I (Page 2 of 2)

19

Liquidity As of 27 September 2008, Anglo was forecasting net negative cash of 12.0 billion by 17 October 2008. The principal

reason is a 10 billion reduction in corporate and retail deposits consistent with recent deterioration. There has been a5 billion deterioration in corporate deposits and 440 million deterioration in retail deposits in the last week. Theprojections assume completion of a securitisation of part of the loan book for 2.2 billion and successful bidding for

ECB funds.

The Inter bank and debt capital markets are effectively closed at present and the projections assume a continuation ofthese market conditions.

Banking Book Assets Banking Book Assets (Available-for-sale financial assets) includes RMBSs, ABSs, CDOs totalling 1.9 billion whichare difficult to value and probably illiquid in the current market.

Main Findings

Section 3.1 - Phase I Extracts (27 September 2008)


23/47


Section 3.2

Phase II Extracts (27 November 2008)


24/47


Area Comment

Anglos business model was successful with many years of uninterrupted profit growth,however, in common with the sector, changing economic circumstances highlight anumber of key underlying risks (1 of 4)

Business model The Banks business model is to lend on a senior first secured basis to proven operators against investment (cash flowsupported but often highly geared) and development property assets with cross collateral and, in most cases,

supported by personal guarantees from the principals. New lending to existing customers is supported by both theasset being acquired and the customers pool of assets held as security. Where possible net worth/asset statementsare obtained from borrowers with estimates made where this is not possible. Loans are priced off market rates whichmeans that there is a positive interest margin earned. Management believe that Anglo attracts the highest level of

security, recourse and risk adjusted margin in its markets.

Management have asserted that the Bank only underwrites loans based on a thorough understanding of the client. Itdoes not accept deals underwritten by brokers or other banks and it never purchases loans from other banks/entities.

All loans are underwritten on the assumption that they will remain on the Banks balance sheet throughout their term.

21

Historical Financial Performance The Bank generated profits before tax of 1.221 billion in 2007 and is presenting pro forma profits before tax of 1.5billion (after treasury but before lending impairments) in the year ended 30 September 2008. This amount is subject toaudit. Since 1990, the Bank has incurred an average rate of lending impairment of 43bps per annum, reaching a

maximum of 101bps in the years 1990 to 1993.

Financial Projections Market Abuse regulations prevent us from publically disclosing forward looking information without it being subject to adetailed verification process which was not part of our scope of work.

Main Findings

Section 3.2 - Phase II Extracts (27 November 2008)


25/47


Area Comment


22

Capital Ratios Anglo Scenarios Capital ratios and the Anglo Scenarios are discussed in Section 3.5 Capital Adequacyof this Summary Report.

Management and People We were informed that Anglos senior management team has significant experience in banking, underwriting, risk andwider financial services. Most of the senior underwriters have in excess of 15-20 years lending risk experience in the

sector and relevant markets and have worked through previous economic cycles. Many have worked with Anglo forlong periods whilst others bring experience from other institutions.

Main Findings



26/47


Area Comment


23

Interest roll up In common with other banks, Anglo provides interest roll up facilities when providing development facilities where

supported by expected future cash flows. The extent to which interest roll up is permitted in any case is determined bypolicy limits, including the strength of the individual client, other cash flows and security and underlying asset values.Management indicated that interest roll up is continually assessed by relevant lending directors and Group Risk

Management and may be extended where deemed appropriate, for example, as underlying asset values increase or toreflect the strength of a borrower or as part of a restructuring. This would be consistent with our sample reviews of thelarger loans, particularly longer term Irish development land plays. The cumulative amount rolled up on any individualfacility can normally be identified. Interest roll up and capitalisation is permitted under IFRS.

Investment property loans In some cases Anglo lends on an interest only basis against cash generative investment properties depending on itsrisk assessment. In certain cases capital repayments will be derived from asset sales or refinancing. The critical risk

assessment in managements view is the robustness of the contractual cash flows derived from the subject propertywhich service and repay the debt facility.

Investment property - security Development loans are converted into investment loans when a development is completed and assets become

revenue earning (tenants in place) and in many cases, the loans are retained on the Banks books post development.The Bank has a significant portfolio funding investment property lending in its Irish book. In the case of a clientengaged in the acquisition of overseas assets (mainly UK and Europe), such loans will typically be secured upon the

overseas asset and also cross collateralised on the borrowers Irish security.

Main Findings



27/47


Area Comment


24

Equity release In accordance with industry norms, the Bank will in certain circumstances provide equity release facilities where there

has been capital and/or income appreciation to allow customers to invest in other projects. The underwriting of equityrelease facilities considers inter alia, the strength of the client and the quality of its asset base in line with normalunderwriting procedures.

Property developer land banksbuilt up over time

A number of key property developer customers purchase or take options over land banks a considerable period of timein advance of local area plans, zoning, planning permission etc. being available. As a result they may end up carryingland at a low base cost relative to current market values. In recent years this model would have allowed them to

accrue significant uplifts in value over time which they realise by selling sites with planning permission or throughdevelopment. The risk is whether with their equity and other resources they have the ability to carry the interest due onloans funding the transactions. Management state that the Banks involvement in major land/development deals has

reduced over the past three/fours years.

Close relationships with keycustomers

Anglo has built up strong relationships with its key customers. Management state that this strategy of developing deeprelationships with what it deems to be the strongest operators is deliberate. From our review of the larger loans in the

portfolio it is evident that a small number of key customers are involved in a large number of transactions andrepresent a significant proportion of the loan portfolio. Anglo considers itself able to attain a thorough understanding ofits clients business, finances and relevant risks, which are continually reassessed in face to face client meetings often

held weekly.

Credit grading There are a number of customers which are not currently on the Banks watch, notable or impairment lists all of whomexhibit potentially serious short term liquidity issues. However, by virtue of their size and risk profile senior

management represented to us that all are subject to regular monitoring up to Executive Director, Board Risk andCompliance Committee and main Board level. Management have confirmed that the Septembernotable/watch/impairment lists have been updated to include these customers.

Main Findings



28/47


Area Comment

Anglos approach to lending: key assumptions re security valuations and stressassumptions

25

Security valuations The security valuations included in Anglos LTV calculations reflect the following general factors which may be

amended to reflect specific circumstances:

- Land valued at the lower of cost or market value

- Construction work in progress at cost

- Completed development properties at net sales value

- Other properties at latest independent external valuations provided by a bank appointed valuer

- The value of shares in private companies are discounted by 50%.

Stress assumptions Customer relationships and loans are stressed on an individual basis rather than across the book. In arriving at

stressed LTVs the Bank discounts property values by 20%.

Interest cover is stressed by increasing base interest rates by 2%. In the current environment it is unlikely that this willbe a significant problem.

Rental income to interest cover is stressed by reducing rental income by 10% with no allowance for in courseincreases in rental income.

Liquidity The scope of our review has not been to concentrate specifically on the wider issue of liquidity in world banking

following the effective closure of the normal inter-bank lending markets. However, the Anglo model is dependent oncustomers ability to successfully refinance significant development and investment loan portfolios in the short to

medium term. This is exacerbated where (i) Anglo is the lead bank in a wider syndicated loan or (ii) significantadditional debt funding would be required for the successful build completion to derive value from development landbanks held by key customers. While the stress scenarios applied by management assume no new net lending for2009 and 2010, it is assumed Anglo will successfully re-finance its own short term borrowings in that period.

Main Findings



29/47


Area Comment

Current economic difficulties are likely to impact Anglo in 2009 and subsequent years

26

Difficult economic conditions for

Anglo and its key customers

Anglo has performed very strongly over the past number of years and expects to generate a core business profit of

1.7 billion before treasury write downs and loan provisions in 2008. Anglo projects this level of core business profit tocontinue for the next number of years because most of its income is annuity based derived from its lending assets.

The business environment in which the Bank and its peers operate has deteriorated significantly in the past six

months and in line with this general trading conditions have deteriorated significantly. The carrying cost of assets maynot exceed their economic value even if they are realisable and as a result the option of interest roll up may not beavailable to customers to the same extent as to date. In addition, while demographics remain favourable, the

continued unavailability of mortgage funding and increasing unemployment may exacerbate already reduced demandfor residential property resulting in a fall in price for units already built and less demand for new developments on theland banks held by Anglos clients. The retail trade is also struggling and if the difficult economic conditions continueinto the medium term shopping centres and retail developments may begin to experience trading difficulties or not be

developed. A number of Anglos customers have significant exposures to the retail sector with Retail Investment andRetail Development loans accounting for 16% and 4% of the Banks loan book respectively.

Whilst these issues may not lead to impairment in Anglos 2008 results, a further deterioration in market conditions

could lead to a reduction in the discounted cash flow attributable to certain assets and thereby materially impact futureimpairment charges. As with the sector in Ireland and internationally, the Bank adopts impairment recognition policiesas prescribed by International Financial Reporting Standards (IFRS).

Large customer exposures The Bank has a number of very large exposures with approximately 15 relationships in excess of 500 million. The

size of these exposures increases the risk profile of the Bank. However, the Bank considers that in all cases they aresupported by diverse portfolios of assets underpinned by material contractual cashflows and with significant

personal/corporate recourse.

Main Findings



30/47


Area Comment

Our review has identified concentrations of lending in a number of areas, for example,shopping centres and land banks in the greater Dublin area (1 of 2)

27

Large customers with cashflow

difficulties

We understand from management that a number of the Banks larger customers are experiencing short term cashflow

difficulties at present and are in the process of disposing of non-core and in some cases trading assets. The diversityof the customers asset base, the reliability of underlying cash flows, the quality of the Banks security (includingrecourse) and the value it will realise along with potential actions of other Banks will dictate in the first instance the

existence or otherwise of impairment and thereafter the level of potential loan loss, if any, the Bank may incur.

Shopping Centre Concentration The Bank has lending exposures secured on shopping centres in the greater Dublin region. The exposures may belending against completed centres or sites for future development (albeit any existing or future commitments to fund

expansions are/will be conditional on pre-lets etc.). In the current economic environment with a forecast decline inretail sales and disposable incomes it is difficult to see any material uplift in shopping spend which may in turn affecttenant demand and undermine the feasibility of some of these development projects. The Bank considers the structure

of the facilities in place, being cross-collateralised and/or supported by existing rental flows from well established, welllet and high quality tenanted assets to be a significant risk mitigant.

Main Findings



31/47


Area Comment

Our review has identified concentrations of lending in a number of areas, for example,shopping centres and land banks in the greater Dublin area (2 of 2)

28

North Dublin land banks/

development sites

There are large exposures to a number of developers with land banks and development sites which are geographically

close in North Dublin and contiguous areas. We have not estimated the number of residential sites potentiallyavailable in these locations. Successful development of all these locations is dependent on a number of factorsincluding completion of local area development plans, zoning etc., an increase in demand from current depressed

levels, services/infrastructure build and continued availability of financing.

South Dublin land banks/development sites

There are also large exposures to a number of developers with residential land banks and development sites which aregeographically close in South Dublin and Wicklow. There is currently a large over-hang of unsold higher density

residential units in these areas. Successful development of all these locations is dependent on similar factors to NorthDublin as noted above.

Funds to develop land banks There are large current and potential exposures to a number of developers with development sites. Significant funds(which have not been committed) will be required to develop these commercial sites to realise their value.

Main Findings



32/47


Area Comment

Other risks include UK hotels and pubs and other banks in syndicates

29

Management Succession / Tax

Planning

In the majority of cases, the promoter remains actively involved in the day-to-day running of their business and in all

cases the Bank considers it has close and open relationships. In a number of development companies (below thelevel of lead promoters), there are possible weaknesses in the senior management teams and until recently littleattention has been paid to succession. In addition financial planning and control, including capital acquisitions tax

planning has been weak. Anglo management have indicated that their efforts to increase customer focus in this areahave borne fruit as many of their major clients have improved in this area recently.

Other banks fundingdevelopments

The Bank has exposures to a number of customers who also have significant exposures to other domestic and foreignbanks. There is a risk that (i) if other banks call in their loans customers may not have the resources to pay these and

Anglos loans or (ii) these other banks may not participate in new rounds of refinancing.

UK Hotels and UK Pub Trade Anglo has loans to certain UK hotel chains. Anglo management view exposure to this sector as diversified with

respect to geography, asset class and underlying cash flows. Any slow down in economic activity in the UK mayimpact the profitability of these hotels and ultimately the recoverability of underlying loans. Anglo management hasassured us that all are trading satisfactorily. The UK pub trade is also experiencing difficulties. Anglo has exposures

to this sector including a number of pub chains in the Watch/Notable category, however, none form part of the Top 20relationships.

Mark to market of collateral

security may indicate losses

If the security on which some loans are secured was marked to market it is probable that significant shortfalls would

occur in line with the rest of the Irish and international banking sectors given current market conditions. Whilst theBanks lending model/underwriting standards rely in the first instance on contractual cash flows, collateral values are akey consideration in the event of default leading to a forced/distressed sale. In accordance with IFRS, Anglo amortises

these securities as IFRS does not permit a mark to market approach for such lending assets.

Main Findings



33/47


Area Comment

Treasury AFS assets

30

Treasury AFS securities Anglo had a portfolio of available for sale financial assets with a fair value of 8.2 billion as at 30 September 2008

which reflected impairment and mark to market losses of 288 million in FY08. There was an AFS reserve of anegative 589 million held on balance sheet at 30 September 2008. The Bank use a number of sources to derive thefair value of the assets carried in the Available For Sale (AFS) balance sheet category. 75% of the prices for these

portfolios come from Bloomberg with the remainder coming from external service providers and broker quotes. Thereis some uncertainty in the market about pricing for certain asset backed securities given market conditions. At 7November 2008 the Bank was still seeking prices in respect of 978 million of AFS assets and expects to obtain thirdparty prices for approximately 50% of these. Currently prices are based on the most recent counterparty prices. It is

Anglo managements belief that the pricing used is conservative.

Main Findings



34/47


Section 3.3

Phase III Extracts (17 December 2008)


35/47


Area Comment

Phase III of our review concentrated on the next 50 largest Land and Developmentexposures. Land bank concentrations may result in significant losses for a number ofdevelopers.

32

Mothballing of developments and

land banks

During our review, we have seen significant evidence of borrowers reacting to the downturn in the residential market

by effectively mothballing development sites and land banks. These sites are not expected to bedeveloped/completed until there is a return in activity to the market. This is a short to medium term solution for manydevelopers. However, the ability to place facilities on hold may be restricted. It will be difficult for the Bank to permit

interest roll up on facilities where LTV is high, interest cannot be funded and further security is unavailable.

South Dublin land banks/development sites

In our Phase II report we commented that there were large exposures to a number of developers with residential landbanks and development sites which are geographically close in South Dublin and Wicklow. Our work on Phase III has

highlighted the fact that this concentration of exposure also applies in the next 50 largest land and development loans.Taking both phases of our work into account there is currently a large over-hang of unsold higher density residentialunits in these areas accounting for a number of years supply and on top of this there are sites without planning

permission in relation to which developers are hoping applications will be processed when local authority infrastructureand planning issues are resolved. Successful disposal of the current and pipeline stock will take many years andappear unlikely to occur at current unit price levels. There are likely to be significant losses for individual developersand in turn the Bank as a result.

Main Findings

Section 3.3 - Phase III Extracts (17 December 2008)


36/47


Section 3.4

Loan Reviews


37/47


Area Comment

In the course of our work we reviewed Anglos top 20 Investment lending exposures andits top 70 Land & Development lending exposures. Detailed loan reviews for eachindividual exposure are contained in the PwC Reports.

34

Approach to lending review In the course of Phases II and III of our assignment, we reviewed a sample of individual lending exposures

concentrating on the most significant exposures based on regulatory groupings.In Phase II we reviewed Anglos top 20 Investment Exposures as well as their top 20 Land & DevelopmentExposures (based on the bank's own classification of these exposures) and 22 other exposures.

In Phase III we reviewed Anglos 40 next largest Land & Development exposures across its Ireland, UK andUS divisions.Our information on the individual exposures was obtained primarily from credit review sheets prepared bymanagement and discussions with senior lending and central credit risk personnel.

Detailed loan review sheets in respect of each of the exposures we reviewed were included in our Phase IIand Phase III reports dated 27 November and 17 December 2008 respectively. Summary tables for theselarge exposures were also provided.

Due to the commercially sensitive nature of this information this information is not reproduced in this SummaryReport.

Top 20 lending exposures The Top 20 Investment lending exposures reviewed in our Phase II report had a combined value of 11.7

billion representing 15.7% of total advances as at 30 September 2008.The Top 20 Land & Development exposures reviewed in our Phase II report had a combined value of 6.4billion representing 9.0% of total advances as at 30 September 2008.

The Top 70 Land & Development exposures reviewed between Phases II and III of our review had a combinedvalue of 12.6 billion which represents some 63% of Anglos total Land & Development loan book as at 30

September 2008 and 17% of its total loan book.

Main Findings

Section 3.4 - Loan Reviews


38/47


Section 3.5

Capital Adequacy and Stress Tests


39/47


Area Comment

Capital stress tests were performed under two different impairment scenarios; both weremore stringent than Anglos own stress tests (1 of 3)

36

Capital Ratios Anglo Scenarios Under the Anglo Base Case, as prepared by Anglo management, core equity and tier 1 ratios stand well in excess of

current regulatory minima by 2011. Under Anglos Scenario 1 core equity and tier 1 equity ratios stand well in excessof current regulatory minima (Tier 1 4% and Total Capital 8%) by 2011; under Anglos Scenario 2 core equity andtier 1 equity stand in excess of current regulatory minima by 2011; and under Anglos Scenario 3 core equity and tier 1

equity stand in excess of current regulatory minima by 2011. These Anglo scenarios assume internally generatedcapital accretion and a raising of 750 million non-core Tier I capital in 2011. This fund raising improves the Tier 1ratio by 81bps and Total Capital Ratio by 80bps in 2011.

In arriving at their conclusions Anglo has made a number of critical assumptions as follows:1. Anglo will continue to generate core operating profits in line with existing profit levels (despite the current

downturn).

2. This assumed level of profit is sufficient to absorb any impairments in that year.3. Impairment charges will be spread over a 2-3 year period and will not spike heavily in any one year.4. No net new additional lending will occur (but funds from loan repayments will be lent again).5. Anglo will not pay any dividends until capital ratios improve significantly.

Main Findings

Capital Ratio - Stress Scenarios We considered stress impairment scenarios based on forecasts being made by market analysts and the projectedimpairment loss experience in other banks by major loan exposure categories and based on Anglos 30 September

2008 balance sheet exposures.

This was done by taking market forecasts for bank loan impairments published by independent analysts and brokers inIreland and the UK during October and November 2008 to arrive at two stress scenarios for impairment losses for

different categories of loans: residential mortgages, residential investment properties, commercial/corporate loans,development land with planning permission, development land without planning permission, secured consumer lendingand unsecured consumer lending.

Section 3.5 - Capital Adequacy and Stress Tests


40/47


Area Comment


37

Capital Ratio - Stress Scenarios

(Contd.)

The analysts forecasts were sense checked against impairment forecasts made by other banks. PwC took the worst

case in each loan category and applied our own view as to future trends to arrive at impairment loss scenarios thatwere higher than those published by market analysts at that time.

We applied the impairment loss for each loan category, as estimated in the two scenarios, against the equivalentcategory in Anglos loan book at 30 September 2008 to arrive at an estimated annual impairment loss. These annualimpairment charges were 2.3 billion and 3.0 billion respectively per annum under the two scenarios for the yearsended 30 September 2009 and 2010. The two PwC impairment loss scenarios exceeded Anglos worst case

impairment loss scenario.

The PwC stress scenarios suggests impairment losses greater than Anglos forecast operating profits before

impairment charges in 2009 and 2010. We applied the PwC scenario impairment losses against Anglos capital androlled this forward for financial years ended 30 September 2009 and 2010 without taking into account capital issues setout in its own capital plans.

The capital base calculated under the PwC scenarios was compared to Anglos risk weighted assets of 85.8 billion asat 30 September 2008 as adjusted for the impact of impairment losses to arrive at scenario capital ratios at 30September 2009 and 2010.

Assumptions 1 to 5 set out on the previous page also apply to the PwC scenarios with the exception of assumption 2.

Under the PwC highest stress scenario, Anglos core equity and tier 1 ratios are projected to exceed regulatory

minima (Tier 1 4%) at 30 September 2010 after taking account of operating profits and stressed impairments.

It should be noted these scenarios were constructed by us at a point in time (17 November 2008) and may not beapplicable at any other date. If we constructed scenarios at todays date or at any other point in time we may have

arrived at a different conclusion with respect to capital ratios. Further, the highest stress scenario represents adownside risk but not necessarily a worst case scenario.

Main Findings



41/47


Area Comment


38

Independent Property Valuation We used an independent firm of property valuers (Jones Lang LaSalle) to value a sample of 160 properties held as

security in relation to the top 20 land & development exposures on Anglos books as identified in our Phase II reviewand report. The results of this work indicated that impairment charges over the period FY09 to FY11 would fall in arange between the two PwC impairment scenarios but closer PwCs lower impairment scenario.

Main Findings



42/47


Section 3.6

Money Market Exposures


43/47


At 30 September 2008 the Bank had 9.9 billion of exposures across the top 10Financial Institutions. All exposures are to EU banks with ratings of A- or above.

40

The table opposite sets out the top ten Financial Institutions

exposures at 30 September 2008 as included on page 127 of ourreport dated 27 November 2008.

The Bank is not exposed to counterparties with credit ratings less

than BBB+.

Money market exposures account for 94% of the total exposure,with Bank bonds (5%) and Repos 1% comprising the remainingexposure.

All of the money market exposures included in the top 10 maturedon or before the 3 October 2008. Money market exposurescontinue to be held at very short dates predominantly one night.

This facilitates active daily management of credit lines and limits.

The Banks single largest exposure is to Irish Life and Permanentplc.

The money market asset balance 'Due from Banks' includes anamount of 7.2bn placed with Irish Life and Permanent plc. Thisamount is balanced (though we believe there is no legal right of

set off) by an arrangement, whereby a non-bank subsidiary of ILPplaced a customer deposit with the Bank for a roughly similaramount. The effect is to gross up the Banks balance sheet,boosting customer deposit liabilities and interbank assets. The

arrangement reduced by approximately 6 billion within 3 days ofthe year end.

Top 10 Financial Institutions Exposures at 30 Se ptember 2008

in m illions

Counterparty Total

Money

Market Repo

Bank

Bonds Derivative

Long

Term

Rating

Irish Life and Perm anent 7,237.5 7,237.5 - - - A

9 other coun terparties

redacted

Source: Management Reports

Main Findings

This page is exactly as presented in the working draft report in relationto Anglo with the exception that the reference to nine other financial

institutions has been redacted for confidentiality reasons. The page did

not appear in the Summary Findings sent to the Minister by theFinancial Regulator and the Central Bank or in the presentation made tothe Minister which were prepared for the purposes of summarising

credit, impairment risk and capital stress scenarios for the six coveredbanks.

Section 3.6 - Money Market Exposures


44/47


Appendix 1

Contract


45/47


Contract

42

Our contracts with IFSRA are dated 18 September 2008, 9 October2008 and 25 November 2008 for Phases I, II and III respectively (theContracts. We have not repeated them here. They form part of therelevant PwC Reports. The scope of our work for Phases I, II and III asset out in the Contracts is repeated in the Scope and Process section at

the beginning of this Summary Report.

Appendix 1 - Contract


46/47


Appendix 2

Glossary


47/47

Term Definition

Glossary of Terms and Abbreviations

EBIT Earnings before interest and tax

EBITDA Earnings before interest, tax, depreciation and amortisation

FLC First Legal Charge

PG Personal Guarantee

IRU Interest Roll Up facility

FY Financial year ended 30 September

LTV Loan to value

ABS Asset backed security

CDO Collateralised debt obligation

RMBS Residential Mortgage Backed Securities

Regulatory Group A regulatory group is two or more parties constituting a single risk because one of them has control over the other orwhere there is no control relationship, if one party were to experience financial problems the others would experience

repayment difficulties.

Appendix 2 - Glossary

Documents

Anglo Irish Bank Price Waterhouse Coopers Report