Watchdogs 'weren't suspicious enough'
The Central Bank and the Financial Regulator, headed at the time by John Hurley and Patrick Neary respectively, are heavily criticised by the Nyberg report, with the two regulators accused of not seeing the dangerous risks building up in the banks before the crash.
Neither the Central Bank or the Financial Regulator were "suspicious'' enough about what was going on in the banks, while the Department of Finance didn't think it had any role in financial stability issues, the report finds.
"The real problem in the Financial Regulator was not lack of powers, but lack of scepticism,'' the report finds.
The report reveals, for example, that even by November 2008, some weeks after the guarantee, the regulator and the Central Bank were still confident about the solvency of all banks and said this position would remain until 2011.
The Financial Regulator is criticised strongly over how it policed Anglo Irish and Irish Nationwide. While it identified corporate governance problems at both lenders, little effective action was taken to resolve them.
At one point credit committee meetings at Irish Nationwide were attended by just one person, the report points out.
Before the guarantee in September 2008 the regulator didn't give the problems the "necessary attention'' they deserved.
"The Financial Regulator does not appear to have appreciated the funding and lending risks accumulating in the banking system,'' said Mr Nyberg. He said these should have been obvious by the returns made each month to the regulator by lenders.
The Central Bank underestimated the risks in the banking system and economy too, Mr Nyberg added. "An active and suspicious Central Bank would have had concerns over macroeconomic data emerging in mid- to late- 2005,'' he said.
As for the role of the Central Bank, Mr Nyberg was clear: "It must be willing to take unpopular decisions." Its failure to be more suspicious and act tougher is hard to explain, said Mr Nyberg, particularly consider the bank was independent of government.
The report made it clear that the Department of Finance should have become involved in the problems much earlier on.
"The relaxed attitude of the authorities was either a result of not understanding the data or not being able to evaluate and analyse the implications correctly,'' said Mr Nyberg.