independent

Wednesday 16 April 2014

Banks rue Fiona's 'interesting insight'

Attention all Irish teenagers. You have been defamed. Last Tuesday, Fiona Muldoon, a top central banker, libelled you.

She likened all you problem teenagers to Ireland's bankers. In a wonderful speech to the Irish Bankers' Federation (IBF), feisty Fiona denounced Ireland's bankers for behaving like teenagers.

Ireland's entire adolescent population should call their libel lawyers.

By likening teenagers to bankers, Fiona branded Ireland's youth as recalcitrant, obstructive and generally bolshie in the face of reasonable adult demands.

An unsympathetic jury could interpret her remarks as dubbing adolescents as greedy, dishonest, overpaid -- and maybe even criminal.

So, teenagers, prepare to serve your writs on the first Irish heroine of the banking crisis. There are few worse charges than being accused of behaving like Ireland's bankers, but damages could be zero as you are victims of friendly fire.

Muldoon used the teenage analogy to illustrate the obstinacy of bankers in failing to tackle the mortgage crisis despite Central Bank demands. She was part of a brilliant ambush that stole the show at the bankers' annual show of arrogance in Dublin's Shelbourne Hotel.

This fiasco of an event began quietly enough. Minister Pat Rabbitte opened proceedings -- urging the bankers to lend more money to small business. That familiar ritual is well played out. Bankers always reply by pleading that they are busting a gut for entrepreneurs.

Which they are not.

Bankers' boss John Reynolds responded predictably. After playing the role of lickspittle to Rabbitte's ministerial rank by applauding the "beneficial impact of the Government's corrective measures . . ." he waffled on about how the banks "reaffirmed their commitment to maximise the supply of credit to viable business . . ."

The audience yawned.

Reynolds finished to polite applause by "looking forward to hearing some interesting insights . . . from our strong line-up of speakers".

John's loyal band of bankers settled into their seats to absorb the normal banking bull, posturing as "interesting insights".

The "interesting insights" were exocets, far too rich for Reynolds's blood. And no doubt deeply chilling for IBF chief executive Pat Farrell -- the architect of the conference.

Interesting insight number one -- Fiona Muldoon -- took the podium. She was a safe choice as an invited speaker.

Fiona was from the stuffy Central Bank stable. And a woman, to boot. Ireland's bankers are not used to any lip from the Central Bank. And they are not used to listening to women, either. Fiona, the female central banker, would not rock any boats.

As Fiona got into her stride, the bankers began to fidget. Fiona was letting her smug hosts have it with both barrels.

First she debunked the bankers' now well-practised mantra of phoney "humility". Earlier, an official IBF release had claimed that the banks had been "humbled" in recent years, now a mandatory mea culpa, which bankers regularly mutter as a preface to resurfacing, renewed, ready to be restored to their former glory.

Fiona ridiculed the bankers' pretence at humility. Echoing the views of virtually every citizen in Ireland, she declared: "When I deal with the banks, I have not found humility. If the industry is grieving for the death of the economy, the mistakes of the past, I know which stage of grief it looks like to me."

Getting into her stride, the regulator lambasted her hosts' attitude to the mortgage crisis. She denounced them for being in denial and for paying lip service to the depth of the mortgage crisis. They were dragging their feet with a policy of "Extend and Pretend".

The bankers in attendance blinked. Who was this woman upsetting their apple cart? She was even warning them that the culture of leadership -- that had been missing during yesterday's property frenzy -- was missing again today. They were followers, procrastinators waiting for something to turn up. Mortgages in arrears were being allowed to fester, borrowers' problems were not being addressed. Bankers were gambling the financial system's survival on flimsy hopes of an upturn in the economy or the property market.

Worse still, this infiltrator was backing up her broadside with new figures. Fiona revealed that residential mortgages were not the only element of deep, deep trouble.

It was bad enough that half of the 167,000 owner occupiers in arrears had no formal arrangements in place. It was worse to hear the news she brought to the delegates -- that 48,000 'buy to let' mortgages with €13bn of debt were now in difficulty.

The bankers were reeling. They had been so busy waiting for something to turn up to rescue them from their first mortgage morass that they had ignored the second swamp.

By the time Fiona sat down, they were stunned. Tuesday morning was meant to mark the beginning of their declared "path to restoring confidence and trust".

Fiona was supposed to be the token female player in this soft setting. Instead, she had torpedoed the restoration.

IBF boss Pat Farrell tried a put-down. Dismissing her disdain for bankers' humility, he claimed to have been told by a regulator "more senior than Fiona" that bankers had not apologised enough for the past. A remark that itself hardly carried the hallmarks of humility.

There are only two Irish regulators "more senior than Fiona". Farrell's smart remark will not have endeared himself to either Financial Regulator Matthew Elderfield or Central Bank Governor Pat Honohan. He is hardly going to win friends and influence people with such retorts.

He is also likely to hear from Schizophrenia Ireland after his follow-up remark accusing the Central Bank of "a touch of schizophrenia". The charity is notoriously sensitive about this affliction being trivialised in the media.

Pat's troubles came in big battallions. On the same morning, he was besieged on a second front. John Moran, the secretary-general of the Department of Finance, the second speaker at the conference, joined Fiona in the ambush.

Moran insisted that the banks would have to forgive mortgage debt that customers could not repay.

Next year, the bankers will no doubt be more careful about their choice of speakers. Neither Fiona nor John Moran can expect to make the cut.

Jousting aside, the two visitors delivered a message of deep foreboding. Behind the bankers' laissez-faire approach to mortgages lies a dark monster. The bankers' refusal to recognise their losses, both in addressing individual arrears and in adjusting their balance sheet values, promises a crisis that could dwarf the 2008 property frenzy. The Personal Insolvency Bill, the Government's proffered lifeline, will only scratch the surface.

As the number of mortgages in arrears for genuine reasons spurts out of control, others in less difficulty will spot that there is safety in numbers. Opportunists will take advantage of the bankers' failure to tackle the crisis and decide not to repay their loans.

Events of recent years have taught bankers nothing. Having survived one crisis, they are refusing to recognise another one. They are delaying, denying and deceiving for a second time. That is why teenagers should take umbrage at the comparisons drawn by one, otherwise enlightened, central banker.

The rest of us should be grateful for her courage.

In the meantime, long live Fiona.

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