None of us had experience of bank regulation, says former watchdog chairman
Published 12/06/2015 | 02:30
None of the board members of the Financial Services Regulatory Authority had experience of bank regulation when the authority was set up, a former chairman told the Banking Inquiry.
Brian Patterson agreed with Deputy Kieran O'Donnell that he had been "ignored" when he approached Finance Minister Charlie McCreevy at the time about the need for staff with regulatory experience.
Mr Patterson was chairman of the authority from 2003-2008.
He told the committee that the body had "clearly failed in its duty to uphold the safety and soundness of Irish banks.
"As chairman of the authority I accept responsibility for my part in that failure. It is something I regret deeply," he added.
He said it was clear with hindsight that the Financial Regulator, as it was constituted, was not entirely fit for purpose.
Stressing how priority was given to consumer protection, Mr Patterson described how in the early years (prior to 2006) there was one very heated exchange about this issue between the Regulator and the CEO of one of the large banks.
"In my presence the CEO of a large bank threw a bunch of keys across the table to our CEO and asked him if he wanted to run the bank," he said.
"The authority simply did not see the enormity of the risks being taken by the banks themselves and the calamity that was to overwhelm them.
"Had we known then what we know now, we would, of course, have acted more strongly and used whatever powers were at our disposal with the forcefulness required to rein in the banks' lending."
Former financial regulator Liam O'Reilly told the inquiry he had missed the "iceberg" that became the financial crisis when he was retiring from office in 2006 and thought he had left the office in a good state.
Mr Reilly regretted that failures in the system "were not recognised during my tenure in office".
He told Deputy Michael McGrath that they had operated the system.
"We didn't have the sense of danger that was required at the time."
He added that they "could have adopted a more aggressive and intrusive policy" but that would have required more resources.
Mr O'Reilly, who was CEO of the authority from 2002-2006, accepted that Principles Based Regulation had "major shortcomings" and there were "inherent weaknesses" in relying on information in banks' annual accounts.
Mr O'Reilly defended his taking up positions on the board of Merrill Lynch in 2007 and Permanent TSB in 2008 after his retirement.
He told Deputy John Paul Phelan he did not believe there was a conflict of interest.
He said he had not done it for the money; "financial gain was not top of my mind". He had done it because he thought he might be of use.
The right to work, he added, was still a constitutional right.