Sunday 15 September 2019

Banking Inquiry: Emergency legislation to nationalise main bank prepared months before Bank Guarantee - former Central Bank Governor

John Hurley, former governor of the Central Bank
John Hurley, former governor of the Central Bank

Daniel McConnell Group Political Correspondent

Emergency legislation to nationalise one of the country’s six main banks was prepared months before the Bank Guarantee in 2008, former Central Bank Governor John Hurley has said.

In correspondence to the Oireachtas Banking Inquiry, Mr Hurley said the question of nationalisation “had already arisen earlier in the year.”

“It was decided that draft legislation to nationalise a financial institution should be prepared,” he wrote in his letter to the inquiry.

The Inquiry heard previously that former finance minister, the late Brian Lenihan, had argued in favour of nationalising Anglo Irish Bank and Irish Nationwide on the night the Government decided to introduce the €440bn Bank Guarantee.

He also said that he cannot recall any financial institution asking him for a "full guarantee" in the run-up to September 29.

The letter, published today by the inquiry, also states that Mr Hurley was not aware of any such request being made to any other officers at the Central Bank or the Financial Regulator.

However, he added that it was possible that guarantees could have been mentioned during meetings with banks after the collapse of Northern Rock.

Mr Hurley said that he did not recall serious disagreements at meetings to consider draft Financial Stability Reports (FSR). He added that he had no recollection of two reports estimating house prices for the 2007 FSR. 

The Inquiry this week published the evidence of Frank Browne, head of financial stability at the Central Bank, who said tight editorial control was exercised particularly in 2007 when warnings about the property bubble were removed from reports.

Mr Hurley said in his statement that some residual drafting, not finalised at meetings, was left to him to complete in consultation with appropriate staff. However, he said such drafting was in full accord with the thrust of the decisions of the joint board of the Financial Regulator and the Central Bank.

The Inquiry is now moving to draft its final report, but remains deeply divided as to what conclusions should be reached.

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