Another Bank Inquiry 'sorry', but is regulation better now?
Published 29/05/2015 | 02:30
The pattern down at the Banking Inquiry is well established at this stage; ex-bankers, ex-executives and ex-regulators have been coming in with their hands held out in contrition.
"Sorry" seems to be the easiest word.
Yesterday it was the turn of former Financial Regulator Patrick Neary. He is "deeply sorry" his former agency failed to prevent the banking crisis, he told the Inquiry.
Not half as sorry as the rest of us. Gallingly, for those who will be paying for the banking collapse for the next generation, Patrick Neary is now retired on an income most working people can only dream of.
That grates, because, however sorry he is now, Mr Neary was a disastrous bank regulator, albeit one who worked within a disastrous system.
His now notorious appearance on RTÉ's 'Prime Time' in 2008 was summed up by the economist Colm McCarthy, quoted in 'Vanity Fair'.
"What happened was that everyone in Ireland had the idea that somewhere in Ireland there was a little wise old man who was in charge of the money, and this was the first time they'd ever seen this little man," says McCarthy. "And then they saw him and said, Who the f**k was that? Is that the f**king guy who is in charge of the money? That's when everyone panicked."
It's a nice turn of phrase, though at the risk of being seen to side with Patrick Neary, one that underplays the systemic failures that led to the crash.
No one at this stage is under any illusion that so called principals based (light touch to you and me) regulation failed in Ireland, spectacularly so.
That changed after the crash. Under Central Bank Governor Patrick Honohan things are far more hands on. Regulators are now heavily involved in everything from vetting bankers, to laying down the law on who banks can lend to, and how much - as we saw with the new lending mortgages caps.
That's the good news. The bad news, to go back to Colm McCarthy's question about who exactly is in charge of the money, is that if anything that's less clear than in 2008. And it was unclear in 2008. At the Inquiry last week John Hurley, who was Governor of the Central Bank in 2008 said that Patrick Neary's, rather than his office, was responsible for overseeing the banks.
Yesterday, Mr Neary said that the Regulator depended on Mr Hurley's Central Bank to understand what was happening in the economy, and how that affecting the banks. He was bound, in his view, to work on the basis that Central Bank predictions of "a soft landing" were correct.
One reason people might not have been clear, back in 2008, about where the regulatory buck stopped was that the system was relatively new - only five years earlier the then Fianna Fail/Progressive Democrat coalition broke-out the office of Financial Regulator from the Central Bank proper. Confusingly, however, both institutions continued to report to the Governor of the Central Bank and to a common board.
The structure was put in place following the so-called McDowell Report, prepared following a review chaired by Michael McDowell, the lawyer and former Progressive Democrat politician, back in 1999.
Unsurprisingly the split was reversed following the crash,
Unlike in Mr Neary's time the Irish Financial Regulator is now fully part of the Central Bank. But there's a "but." Since November last year a new, Frankfurt-based, European bank regulator is also responsible for supervising most banks here, theoretically working in tandem with Irish authorities.
The new bank overseer, the Single Supervisory Mechanism, is part of the European Central Bank. As a new authority it is by definition untested. As we saw from the Irish crash in the past blurred lines proved a disaster. Clarity on how this new regulator interacts with the existing oversight structures is going to be crucial.