Central Bank's Tony Grimes

THE Central Bank balked at swapping €7bn in cash for Anglo assets in 2008 but later agreed to take on €11.5bn of the bank's assets in return for cash.

The Central Bank would not do the €7bn swap which the bank had proposed "unless absolutely necessary" but the bank's liquidity situation was so grave that it could happen within the "next day or so", Central Bank director Tony Grimes told the NTMA and Department of Finance on 22 September 2008.

Anglo Irish had requested the activation of a swap facility with the Central Bank – essentially it would put up a number of assets, the nature of which is still not known – in return for the loan.

Anglo was desperate for cash in September 2008 as major depositors fled because of fears the bank would collapse. Separate documents reveal that there were warnings from advisers Merrill Lynch that Anglo would run out of cash by the end of September. The bank was nationalised four months later leaving the taxpayer on the hook for €23bn.

It has since emerged that the Central Bank lent €11.5bn to Anglo Irish Bank in 2009. The bank's governor Patrick Honohan said on Friday that it had applied its standard risk assessment to the collateral put up by Anglo for the loan as it would to any liquidity facility and it expected to be repaid in full.

"If we had expected any impairment losses we would have been very prompt to take a provision and we have not made a provision," Honohan said.