Banking Inquiry fails to ask the right questions
Published 25/07/2015 | 02:30
In a week when boom-time developers Johnny Ronan and Joe O'Reilly were back in the news with plans to purchase prime Dublin sites, the Banking Inquiry rumbled on.
Taoiseach Enda Kenny appeared on Thursday and gave an account of his time in opposition, in particular around the dark days when the banking system was at near-collapse and the economy shuddered to a halt.
His view on what went wrong? Fianna Fáil was in government.
Bizarrely, Senator Marc MacSharry from that parish quizzed him on whether he ever took a lift or helicopter ride from a developer. The Taoiseach insisted he had never sought one, and no smoking gun was proffered.
Separately, a developer launched an attack on bad-bank Nama, claiming it had hampered economic recovery. There was a lot of blame thrown around. Not a lot was new. The whole thing was a bit of a farce.
For a jaded electorate worn down by unrelenting austerity, the Banking Inquiry has descended into a sideshow of political points-scoring. Unless chairman Ciarán Lynch takes control very quickly, it might as well shut up shop.
We have already learned much about the events of those years from well-informed journalism and a series of government-commissioned reports.
We know that banks forgot that providing loans was about risk, and not selling services, and that high spending and a reliance on property taxes played a major role in the collapse, helped by weak governance. We also know that all the players were too close.
So what questions need to be asked, and what should the Banking Inquiry be doing?
It needs to be less hectoring and avoid a nonsensical focus on helicopters and days out at the Galway Races. It is insights, like the one offered from former union boss David Begg, a non-executive director of the Central Bank over 15 years, which should be focused on.
Asked if he had received any training to prepare him to become a board member, he said "no". Should the inquiry not be asking what level of training exists today, if any?
For much of the period when lending spiralled out of control, the Central Bank wasn't responsible for regulating the banks. That rested with the Irish Financial Services Regulatory Authority, established in 2003 but which did not have a sanctioning regime in place until 2005.
These powers came at a time when banks were lending to anyone with a bit of land, a bit of a plan but generally not a bit of collateral to back up their visions.
The inquiry must ask how was day-to-day lending managed, and outline in painstaking detail how the system operated. How exposed were borrowers, not only to the bank issuing the loan, but to other institutions? Did banks look at the sites and examine if essential services such as water, power and transport links were in place, so whatever was built would sell? Did they look at who was selling the land?
What, if any, was the relationship between the lending and risk committees? Did the risk committee have access to borrowers' details, and how were the borrowings secured?
One banker makes the point that unless there is clear oversight and supervision, a bank can be wholly exposed to property deals.
"Say I lend money to develop a land bank. I need to look at who is selling the land. Are they also a customer of the bank? If I, as a bank, finance a loan to one customer, to buy land from another customer, what happens if that customer (the original landowner) goes to borrow money from me, using the proceeds of the sale as collateral.
"That money has come from my bank, so I'm entirely exposed. If anything goes wrong, the bank is on the hook. How is that exposure managed?"
It's a nitty-gritty, forensic examination of banking practices both then and now which needs to take place if we are to avoid a repeat of the past. The problem? Those issues don't garner headlines.
We cannot trust the banks. Over the last decade, some would argue longer, they have not proven themselves to be responsible.
While we have learned there was little communication between arms of government, there is much information we are lacking, and may never know, as some of the main players cannot appear before the inquiry due to ongoing proceedings in the courts.
It's not to say a tribunal of inquiry would offer much more. After all, key recommendations of the long-running Mahon Tribunal have yet to be implemented. This inquiry should be dull and less about rounds of golf and more about the mechanics of running an economy.
Banks should fear the regulator, not invite them to lunch. Many of us don't know what's different today, which is a failure of the State and its agencies to inform a beaten people. How can the next generation learn to identify potential problems if they are not informed?
Perhaps there's good reason why the electorate voted not to allow Oireachtas committees conduct inquiries back in 2011. On the evidence to date, our politicians appear more interested in scoring points then exploring the mechanics of what went on in the past, to help avoid making those same mistakes.