Back To Business, Emmet Oliver - AIB's capital error

The fiasco and fudging over the appointment of an AIB chief executive does not bode well for the chances of that institution raising money from the capital markets next year

Saving face: AIB head of capital markets Colm Doherty

Saving face: minister of finance Brian Lenihan

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Do they add something to the water down in AIB's Bankcentre? Every time the bank attempts to make a reasonably routine decision it ends up mired in enormous public controversy. Politicians weigh in, shareholders moan behind the scenes, the media get indignant and the bank retreats into its bunker.

The same pattern has emerged with the choice of a new chief executive to succeed Eugene Sheehy. First the post was destined for capital markets boss Colm Doherty; then it was destined for various outsiders (most of them in the US); then it was destined for chairman Dan O'Connor and now we seem to be left with the biggest fudge of them all – jobs for O'Connor and Colm Doherty, with talk of Michael Somers of the NTMA riding shotgun as an independent director.

The clear imperative for the bank and the government (nobody seems to care about shareholders these days) was to devise some solution that would end all the chatter about AIB having problems attracting a chief executive.

The solution is no doubt also designed to allow everyone to save face, from Brian Lenihan to Colm Doherty to Dan O'Connor (admittedly O'Connor had the least amount of 'face' to save).

But what do all the musical chairs add up to? Clearly AIB has had problems trying to attract an external candidate of real calibre, whether because the pay on offer was inadequate or because of the bad reputation that Irish banks have attracted internationally.

The main role of the AIB chief executive in the next three months is to tap the capital markets for fresh equity capital. The ideal person to do that would have been an internationally-recognised heavyweight who could pull off the delicate act of a rights issue by charming and winning over a sceptical investor base.

None of the candidates, even with their respective strengths, really fits that description. There is also a danger that in dividing roles up between Doherty, O'Connor and now Somers, the leadership function of the bank will become dangerously atomised and strained.

The bank's interim management statement next week may clear up some of the grey areas in the new regime, but a leadership operating under some kind of 'interim' banner could hardly have been the ideal solution all parties were looking for.

The fact that the solution does not look very strong in the context of raising private funding would suggest to the sceptics among us that raising private capital is no longer regarded as that crucial. If that is true, all roads lead to nationalisation or, as more polite people like to put it, majority government control.