Wednesday 26 April 2017

Coalition 'failed to consider alternatives to bank guarantee'

Peter Nyberg, author of the report into the banking sector, at a news conference at the Department of Finance yesterday
Peter Nyberg, author of the report into the banking sector, at a news conference at the Department of Finance yesterday

Emmet Oliver Deputy Business Editor

THE last Government should have bought itself more time and weighed up cheaper alternatives before opting for the largest bailout in the State's history, a new report on the banking crisis concludes.

But alternatives to the state banking guarantee were not examined properly because of incomplete information, the report reveals.

And if the Government realised how bad the banks' balance sheets truly were, a different decision might have been taken, Finnish banking expert Peter Nyberg found.

Former Finance Minister Brian Lenihan told the Irish Independent last night it was a "hypothetical" question whether he would have done anything different.

The 156-page Nyberg report, based on 140 individual interviews and 200,000 documents, contains damning revelations about how the banks were run in the final years of the boom.

The report said it was barely believable that professional people could take such huge risks running their banks, as it pointed to home-grown causes for the €70bn meltdown.

The Nyberg report does not name and shame anybody, but attacks a herd mentality within the financial system from 2003-2009.

It also reveals that the Financial Regulator Patrick Neary and Central Bank governor John Hurley assured the Government in 2008 the banks would not run into trouble and would be solvent up until 2011.

Mr Nyberg said that the September 2008 bank guarantee might be justifiable "given the information provided" at the time. But the Government, led by Brian Cowen and Brian Lenihan, could have taken several steps to slash the cost of the bank bailout, he added.

"Buying time, even until the following weekend, would not have been an idle exercise," he said.

Surprised

But Mr Lenihan last night said: "We would have had to put money into Anglo anyway by that point."

He did, however, admit he was surprised at how little planning for such an event had been done by the Central Bank and his own department.

Mr Nyberg claimed the number of banks being guaranteed could have been trimmed, the duration of the guarantee could have been reduced, and only deposits and inter-bank loans might have been protected.

The Government could have avoided a blanket guarantee and instead looked at other solutions like nationalising some banks and splitting others up. With added time the Government might also have consulted its European partners more closely and emergency legislation could have been drafted to close down certain banks, Mr Nyberg said.

The report reveals that there were discussions in Government about nationalising Anglo Irish and Irish Nationwide during the night but both these ideas were abandoned.

It is suggested in the report that either AIB or Bank of Ireland wanted to see Anglo Irish nationalised as it was causing much of the problems for the banking system in general.

There was some support for this at the Department of Finance, but the Financial Regulator made it clear that Anglo was solvent.

Irish Independent

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