Sunday 23 October 2016

Bank inquiry: blanket guarantee wasn't the only option available

Published 23/01/2016 | 02:30

Then Finance Minister Brian Lenihan and Foreign Affairs Minister Micheál Martin face the press two weeks before the bank guarantee. Photo: Brian Farrell
Then Finance Minister Brian Lenihan and Foreign Affairs Minister Micheál Martin face the press two weeks before the bank guarantee. Photo: Brian Farrell

The final report of the Banking Inquiry will suggest the blanket bank guarantee was not the only option available to the Government as the economy crashed in September 2008.

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It is understood the report will find major fault with both the Financial Regulator and the Central Bank, saying they had the powers to protect the financial stability of the State but didn't intervene.

One of the most contentious issues is likely to be a 'letter of comfort' that was agreed between the Central Bank and Anglo Irish Bank the day before the guarantee was given.

Its existence suggests that ­Anglo Irish Bank would have been in a position to continue operating without the guarantee.

Then Finance Minister Brian Lenihan was aware of the letter before the guarantee was agreed.

However, there are no minutes of the discussions that led to the guarantee in September 2008 so it is unclear what discussions took place around Anglo Irish Bank on the night.

The Irish Independent also understands that the report says the 'soft landing' theory presented to the public by many politicians was never robustly tested or validated.

Details of the report began to emerge yesterday but it is not due to be officially released until next Wednesday.

TD Joe Higgins, who was a member of the inquiry, last night criticised the leaks saying they "carry the hallmark of some supporters of the report attempting to shape a narrative around the findings they would prefer to have highlighted in advance of the official publication".

He has declined to sign the final draft and will instead publish his own analysis and conclusions next week.

The final report is believed to say that the six main banks moved very far from prudent lending practices during the boom years.

It notes that in some instances they entered joint ventures with developers.

In relation to the property sector, the report says proper valuations were not always carried out.

The role played by Europe during the economic crash will also take up considerable space in the report.

It is understood to state that the European Central Bank (ECB) maintained in November 2010 and March 2011 that burden-sharing would be inappropriate. ECB head Jean-Claude Trichet told Finance Minister Michael Noonan in March 2011 that a "bomb would go off in Dublin" if burden-sharing took place.

But had Mr Noonan gone ahead with burden-sharing, the NTMA estimated that €9.1bn could have been saved for the Irish taxpayer.


Meanwhile, Public Expenditure Minister Brendan Howlin last night launched a scathing attack on Fianna Fáil ­leader Micheál Martin, saying he is "the arch revisionist" who ­abandoned Brian Lenihan as the economic crisis was ­developing in 2011.

The Labour TD claimed Mr Martin thinks the later stages of the last government were "the halcyon days".

"He wants to rewrite history, that his government was on top of things," Mr Howlin said at the launch of Kildare South candidate Mark Wall's election campaign. "That he and the late Brian Lenihan worked hand in hand. Hardly.

"He ran away in the hour of need and put his own political future before that of the country. He was no ally of Brian Lenihan. He left him in the lurch."

He went on to describe Mr Martin as the "Bobby Ewing of Irish politics".

"So the people of Ireland need to be wary.

"They are being asked to choose between ­stability and instability.

"The kind of instability that has prevented the formation of a government in Spain.

"The kind of instability that prevents that Spain tackling an unemployment problem that is crippling that country and the lives of their young people in particular. Instability is the enemy of progress," he said.

Mr Howlin concluded: "Fianna Fáil offer only a return to the days so bad that Micheál Martin pretends to have forgotten them.

"But the Irish people haven't forgotten and they won't let Fianna Fáil do so either."

Irish Independent

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