Peter Fitzpatrick, finance director of Irish Life & Permanent, resigned in the early hours of Friday morning amid continuing controversy over the bancassurer’s moves to provide a €4bn deposit to Anglo Irish Bank on the final day of Anglo Irish’s financial year.

The resignation, together with that of David Gantly, head of group treasury, was announced following a lengthy board meeting which broke up after midnight.

Brian Lenihan, Irish finance minister, had earlier on Thursday called in Gillian Bowler and Denis Casey, respectively the chairman and chief executive of the bancassurer. Before this morning’s board decision, Mr Lenihan told Irish radio: “I shared my views with the chair, and I would expect the board to face up to its responsibilities.”

The IL&P chairman said in a statement early Friday morning that she “apologised unreservedly” for what she called “mistakes.”

The board expressed “strong disapproval of and disappointment with some of the specific measures used to support Anglo Irish” but said Mr Fitzpatrick’s “only motivation was to provide support for the broader financial services sector in accordance with his understanding of the expressed wish of the financial regulator and the central bank.”

Shares in Irish Life jumped 8 per cent in early Dublin trading to €1.79.

In the statement the board said the regulator had told the non-executive directors in May that “it was the policy of both the central bank and the financial regulator that Irish financial institutions would work to support each other in the face of the unprecedented threat to the stability of the Irish financial system arising from the international credit crisis.“

Mr Lenihan told parliament on Wednesday he was “advised that Anglo Irish placed funds with Irish Life & Permanent. A non-bank subsidiary company of Irish Life & Permanent then deposited a similar amount in Anglo as a customer deposit.”

Bankers say by treating it as a customer deposit rather than an interbank borrowing, Anglo Irish was able to improve its loan-to-deposit ratio at year end.

According to details in the IL&P statement, Irish Life Assurance deposited €7.45bn with Anglo Irish during September, including €4bn on September 30, the last day of Anglo Irish’s financial year and the same day the government introduced its blanket guarantee of all €440bn liabilities of its six domestic lenders.

Each deposit was matched by an equivalent cash transfer from Anglo Irish to IL&P which was described as “collateral.”

On September 29, the day before the guarantee, IL&P had turned down an additional request for deposits from Anglo Irish because it was not able to provide collateral.

IL&P reiterated all transactions were “properly accounted for” and “fully disclosed in our regular reports and returns to the financial regulator.”

Mr Lenihan said the discovery of the transaction, which he learnt about only last month, contributed to his decision to nationalise Anglo Irish on January 16.

Anna Lalor, analyst with Goodbody stockbrokers, said in a a note on Wednesday that the deposit transaction “is obviously a lot more serious as it was a joint effort to make the Anglo Irish balance sheet look better for its year-end results”.

The controversy surrounding the transaction diverted attention from the government’s recapitalisation initiative, announced on Wednesday night, which will see the state take a €3.5bn investment in both Bank of Ireland and Allied Irish Banks.

In a trading statement Thursday, Bank of Ireland raised its loan loss forecasts for the three years to 2011 from €3.8bn to €4.5bn including €1.4bn in 2009.

In an interview with RTE, the state radio station, Brian Goggin, the Bank of Ireland chief executive who is due to step down in June a year earlier than planned, admitted the banks had made mistakes.

“We all got carried away with the euphoria. I suppose if I have a regret, my regret is that I didn’t see this coming. That is a regret I do have that I didn’t perhaps question in a more challenging way the ultimate growth that Ireland was enjoying and that it was unsustainable.”

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