Patrick Honohan: divided views as Professor finally withdraws from the Bank
Published 25/11/2015 | 02:30
Patrick Honohan retires as Central Bank Governor today and his successor, Philip Lane, formally takes over tomorrow.
In his final address, the Governor will give an unscripted speech on debt and austerity to an economics workshop in Dublin today. Reflecting yesterday on Professor Honohan's term in office, economists and industry representatives praised his academic rigour and efforts ensuring his office's independence, but critics argued he didn't do enough to protect consumers, and was too slow in dealing with the mortgage arrears problem.
In November 2010 his explosive interview with RTE's 'Morning Ireland' alerted people to the looming EU/IMF bailout and catapulted him to national prominence. There are now differing views on whether the move revealed the reality of the situation for the first time, or rushed the Government into agreeing to what was initially a flawed and punitive deal.
There is no doubt the intervention established the clear line Prof Honohan would continue to maintain between his office and Government of the day.
On the domestic front his legacy will be judged primarily on how the Central Bank dealt with the arrears crisis.
Alan Barrett, director of the Economic and Social Research Institute (ESRI), said that when Prof Honohan took the job in 2009, he brought a level of expertise to the role which was possibly "unparalleled" at that time in Ireland's public service.
"We saw once he was in the job that he also had a high degree of personal strength and independence. This was shown when he announced that the bailout would happen and later when he came under pressure on the new rules on mortgage levels," Mr Barrett said.
Prof Honohan was appointed Governor in September 2009, replacing John Hurley, breaking with the tradition of appointing a civil servant to the top role.
Dermot O'Leary, economist with Goodbody Stockbrokers, said Prof Honohan's firm handle on his independence should be seen as his greatest achievement. "While this is something that should be expected of a central banker, it was largely absent prior to his appointment," he said. "One criticism would be the inability of the Central Bank to foresee the scale of the capital requirements in the banking system, which had to be dealt with on a number of occasions, culminating in the stress test exercise of early 2011."
On Prof Honohan's watch the Bank grew rapidly, escaping the austerity felt across the rest of the public sector thanks to extra levies on banks, but senior executives have come and gone with alarming speed and a looming crisis in the insurance sector indicates that any rise in the organisation's effectiveness has lagged the increase in resources.
Prof Honohan's final year in office has been dominated by reaction to the new mortgage deposit rules, which ensure tighter loan-to-income levels and require house-buyers to produce a deposit of up to 20pc.
Critics - who have included ministers - argue it will hamper growth in the housing market and force people unable to cobble a hefty deposit together into an expensive rent trap.
"One argument was that this was the wrong time to do it. The housing market was just recovering from a crash, and why introduce the rules then.
"I think that completely misses the point. You want to get the new market that emerges to be on sound footing. So you don't want to be introducing these when you think a bubble has already emerged," said Ronan Lyons, an economist with Trinity College Dublin, adding that the Governor's job is to ensure financial stability and to avoid the mistakes of the past.
But critics have focused particularly on the area of consumer protection. Mortgage arrears, although falling, remain stubbornly high.
"The key fact is, the Central Bank, under his watch, failed to get the balance between banks and consumers right and tipped it in favour towards banks, at the cost of consumers," said David Hall, of the Irish Mortgage Holders Organisation.