All financial authorities excoriated in damning Dail PAC report
DEPARTMENT of Finance officials didn't know the "scale of the disaster being faced by the banks" even in the days leading up to the bank guarantee in September 2008, according to a damning new report.
The final report from the Public Accounts Committee (PAC) of the last Dail -- which took evidence from most of the key players involved in tackling the banking crisis -- also said "neither the Central Bank nor the Financial Regulator had a handle on what was going on".
It said the department was aware of the unsustainable housing boom, but "did not ring alarm bells at the imbalance in the economy". The draft report will be published soon.
Two chapters focus on the knowledge of the state institutions of the solvency of the banks and how well equipped they were to deal with the crisis.
The conclusions are based on evidence given by Kevin Cardiff, secretary general of the Department of Finance, the NTMA, and Financial Regulator Matthew Elderfield.
"It is clear from the evidence of the Department of Finance that even up to late September 2008, the Department of Finance did not know the scale of the disaster being faced by the banks, especially in terms of the losses that would arise in their respective loan books.
"It is also clear that the focus by the department in the period running up to the guarantee on September 28 on liquidity rather than solvency issues was based on assurances given by the Central Bank and Financial Regulator."
It found that these assurances were given by the Financial Regulator as late as September 25, when it said there was no evidence to suggest Anglo Irish Bank was insolvent.
It also said there was not enough internal expertise in the department, which was "totally reliant on outside sources of information" and "at no stage did it undertake a detailed study of the risks" of the housing boom.
"The department... were aware of the danger signals, but took too much comfort from the analysts that predicted a softer landing in the housing market."