FIFTY million euro that Bank of Ireland could have used last year to save hundreds of small businesses from going to the wall was lent to the bank's directors and people 'connected' to them instead, the Sunday Independent can reveal.

The shocking figures -- which lie buried on page 300 of the bank's latest annual report -- were last night described as "disgraceful" by independent TD Shane Ross.

"Taxpayers and small shareholders deserve an explanation for how State-owned banks can allow top directors and staff such generous facilities while small businesses are being crucified," he said.

The Dublin South TD -- who is hotly tipped to secure the chairmanship of the Dail's Public Accounts Committee -- called on Finance Minister Michael Noonan to seek an immediate explanation from the Bank of Ireland on the controversial loans.

"Now that the State owns 36 per cent of the bank and is likely to have a majority stake shortly, the Minister for Finance should call in the Chairman and Chief Executive, Messrs [Pat] Molloy and [Richie] Boucher, and ask how the bank is continuing to behave in such a generous fashion to its own top brass," he said.

The most startling case shows how one unidentified person 'connected' to Bank of Ireland governor Pat Molloy received a massive loan of €35.2m in 2010.

According to the bank's own definition, a 'connected' person can be "a director's spouse, parent, brother, sister, child, a trustee where beneficiaries of the trust are the director, his spouse, children or a company which he controls, or a company controlled by the director or a person in partnership".

While the Molloy loan was reduced to €640,000 by the end of 2010, the bank's decision to sanction the original multimillion-euro loan at a time when it was itself in a fight for its own survival will invariably raise questions about the judgement of its senior management.

Further scrutiny of the bank's latest annual report reveals how 20 members of Bank of Ireland's so-called Key Management Personnel (KMPs) and people connected to them saw their loans from the bank increase from €9.301m on April 1, 2009 to an eye-watering €13.999m by December 31, 2010.

The staggering increase in the amounts lent to the bank's senior management and people connected to them is all the more bewildering when one considers BoI's battle to raise €4.2bn in fresh capital in a desperate bid to avoid outright State ownership.

The rules governing the disclosure by banks of loans given to their directors were tightened considerably by the Financial Regulator in the wake of revelations in December 2008 that former Anglo Irish Bank Chairman Sean FitzPatrick had borrowed €87m from his own bank.

Under the new rules, all banks under the control of the Financial Regulator must provide details of all directors' loans and borrowings.

Business Section Page 1 & Shane Ross, Business Page 8

Sunday Independent