Hurley may be more deserving fall guy than Neary
SINCE announcing his retirement in January 2009 ex-Financial Regulator Patrick Neary has been identified as the chief architect of the financial crisis.
But has the blame been doled out in a rather unequal fashion? What of the other regulators? Most notably, how much culpability should attach to John Hurley, the former governor of the Central Bank?
Last week's monster report on the crisis by Patrick Honohan, Hurley's successor, contains a number of startling revelations, and chief among them is that if blame is to be shared between Hurley and Neary, the former head of the Central Bank should probably accept more of it.
For example, Hurley is blamed for the "triumph of hope over reality" approach to financial regulation in Ireland during the key period leading up to 2008.
Honohan says the Central Bank, during the period when it was led by Hurley, was all about adopting "a very cautious approach'' and not being seen to be talking down the property market. This was not its role -- its role was to protect the financial stability of the system.
Crucially, the Central Bank had "extensive powers'' to choke off the boom, but did not use them, the report concludes. Hurley did speak at press conferences and in speeches about the inflating property bubble but "these pronouncements stopped short" of actually calling on the banks to change their behaviour, Honohan notes.
Meetings were held by Hurley with bank executives but no minutes of what was said were taken, according to Honohan. While there were no minutes taken, few strong messages were "conveyed" to the banks, Honohan alleges.
As if this wasn't bad enough for Hurley, one of the key conclusions of Honohan is that while the Financial Regulator, headed by Neary, did too little too late, the Central Bank appears to have done very little at all, apart from uttering the odd meek comment about the dangers implicit in rising house prices.
While belatedly in 2007 the Financial Regulator imposed higher capital requirements for speculative commercial property lending, it was too little, too late. But Honohan, in a key section, highlights that at least Neary's organisation tried to halt the juggernaut, while Hurley in contrast was far too passive.
"Despite the Central Bank's primary responsibility for financial stability, it was, in fact, the Financial Regulator's side, and not the Central Bank, which took the most concrete action to intervene,'' Honohan says of the banks and their exposure to property lending.
Despite such observations Neary is likely to remain public enemy number one for the grievous regulatory lapses that occurred, but Honohan's report suggests that culpability should be spread more evenly in future.