Former Anglo Irish Bank group chief executive David Drumm and chairman Seán FitzPatrick at last year's AGM

THE Department of Finance raised no concerns when told about the controversial transfer of billions of euro from Irish Life & Permanent to Anglo Irish Bank in a bid to dress up the books of both banks, claims a secret internal report compiled by Anglo and seen by the Sunday Tribune.

In a set of astonishing new revelations and claims, drawn from legal memos, transcripts of phone calls and audit material, Anglo claim that a senior finance civil servant, who works closely with minister Brian Lenihan, assured IL&P he understood why it was necessary to carry out the transactions and there was no need for concern over the arrangements.

An internal audit report compiled by Anglo's audit department includes an account of a meeting attended by the official at the Department of Finance with IL&P on 22 January. The building society said it took a "lot of comfort" from the meeting and they were left with "the clear impression that they should not be worried about it".

The report does not say whether the official discussed the issue of transfers between the two banks with minister Brian Lenihan subsequently. But in relation to the official's discussions with IL&P, it states: "He acknowledged that the bank had taken them through the transactions previously and that the Department of Finance understood why they were entered into. They left with the clear impression that they should not be worried about it."

In a statement to the Sunday Tribune yesterday, a Department of Finance spokesman said: "The Department cannot understand how an Anglo Irish Bank internal audit document can purport to accurately set out what occurred at a meeting between the Department of Finance and Irish Life & Permanent.

For clarity, at no time did the Department of Finance approve of the transaction in question.

"As previously stated, when this matter came to the department's attention during the PwC review it was referred to the Financial Regulator for further investigation. The department never approved of this transaction."

The Sunday Tribune has seen a copy of the audit report and transcripts of the phone calls between Anglo Irish and the Financial Regulator concerning the arrangements. The explosive contents are likely to heap pressure on the government to immediately reform and restructure the Financial Regulator and to give a detailed account of whether Department of Finance officials provided approval, even in retrospect, for the transfers.