Wednesday 28 September 2016

Banking Inquiry revealed truths

Published 13/09/2015 | 02:30

Kevin Cardiff, the former Secretary General of the Department of Finance, who told the Banking Inquiry that Ireland was pushed quite hard into the bailout programme in 2010
Kevin Cardiff, the former Secretary General of the Department of Finance, who told the Banking Inquiry that Ireland was pushed quite hard into the bailout programme in 2010

The often-criticised Banking Inquiry, which has concluded its hearings in public, has done the State some service in that it has illuminated to a greater extent one of the most traumatic events in modern Irish history.

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The inquiry was set up to establish the reasons why the country experienced a systemic banking crisis, including the political, economic, social, cultural, financial and behavioural factors and policies which impacted on, or contributed to, that crisis, and also the preventative reforms implemented since those events.

The brief was broad and, in truth, the inquiry did not always live up to its stated intention, although no particular fault can be attached to the members of the Committee of Inquiry, which under the chairmanship of Labour TD, Ciaran Lynch, by and large acquitted themselves adequately.

Almost 50,000 documents amounting to hundreds of thousands of pages were sought and received and the committee heard oral evidence from 128 witnesses over 49 days since last December.

There were some notable contributions, not least from Kevin Cardiff, the former Secretary General of the Department of Finance, who told the Banking Inquiry that Ireland was pushed quite hard into the bailout programme in 2010.

Other significant political figures at the time also confirmed what many had already come to suspect, that Ireland was 'bounced' into a ruinous bailout by the European institutions.

In that regard, the views expressed by the former president of the European Central Bank, Jean Claude Trichet, and the manner and forum in which they were expressed, represented the lowest point at the inquiry.

The former ECB chief denied that he had telephoned the former Minister for Finance, Brian Lenihan, to insist that the Government save its banks at all costs and denied that he had ever said a "bomb would go off" in Dublin if bondholders were burned.

Subsequent evidence, not least from the current Finance Minister, Michael Noonan, who belatedly revealed that he too had received a similar 'bomb' threat, have raised serious questions over the credibility of Jean Claude Trichet's evidence that the inquiry must now adjudicate upon. The evidence of Ajai Chopra, of the IMF, was also instructive in this regard.

Evidence at the inquiry has shown that Ireland was also the author of its own misfortune through failures in financial regulation and loose budgetary policy in the years leading up to the crash.

The ECB was entitled to pursue whatever policies were lawfully available to limit the contagious effects of bank failures.

But the ECB does not enjoy unfettered powers in distributing the costs of these policies. In particular, it should now be clear that the imposition of these costs on Ireland served no useful purpose in European terms, but made things far more difficult in this State.

The distinguished economist and commentator Colm McCarthy has argued that the incentive for Ireland to challenge the legality of the ECB's actions is clear: enormous costs, running to tens of billions that have been arbitrarily added to Ireland's debt burden.

It is now to be expected that the Banking Inquiry will publish a clear and concise report, which correctly apportions fault and blame where it is due and that whatever actions may be necessary will follow.

Sunday Independent

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