Banking Inquiry: Former Central Bank governor accepts the 'Central Bank's share of responsibility for what occurred'
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Former Central Bank Governor John Hurley today accepted the “Central Bank share of responsibility for what occurred” in the banking crisis.
Mr Hurley told the Banking Inquiry that he believed, however, that “regulation on its own could not have stopped this crisis from happening.”
He very much regretted that the Central Bank had “underestimated the risks”.
The former governor explained that there was a “strong view” on the night of the Bank Guarantee “that the government had one opportunity to assuage the markets.
“If the decisions taken were considered inadequate and failed, the consequences for the banking system would be devastating and lead to very serious economic and social fallout for the country as a whole”, he added.
Mr Hurley stressed: “I supported the decision being taken as the one most likely to ensure that these consequences for the banking system and the country would be avoided.”
He said he had not supported a bank guarantee when it was first raised but was conscious that if matters deteriorating significantly and the Irish banking system faced imminent collapse “there would, in the absence of a European initiative, be no choice but to do so”.
At meetings held during the weekend before the guarantee decision it appeared likely that the financial institutions would have sufficient liquidity to get through the following week.
“ The liquidity outlook changed quickly on the morning of the 29th September when it became clear that without assistance Anglo would not be able to open for business the following morning,” he said.
Mr Hurley said when the Anglo situation arose “the major concern was how to prevent contagion from Anglo spreading to the other banks, which were not then liquid but had and were experiencing significant outflows.”
He told the committee that arrangements had been made in the Central Bank to provide assistance to Anglo to enable it to open for business on the morning of September 30th.
“The bigger issue was how to avoid the risk to the entire banking system materialising with catastrophic consequences for the entire country.
“Without decisive intervention the risk of such an eventuality was very likely. I supported the guarantee in these circumstances”, he added.
The option of nationalising Anglo together with issuing a guarantee for the remaining banks was considered on the night, said Mr Hurley.
“Overall it was considered that the signal effect of nationalising Anglo would be more negative than positive and could raise market concerns about the systemic weakness of the Irish financial system and, as with ELA, threaten the credibility of the guarantee.”