Monday 23 October 2017

At last, public to get the full story of night of Guarantee

Banks, auditors, regulators, Nama, politicians and Department of Finance to be grilled by PAC

Former bank chiefs Brian Goggins (left) and Eugene Sheehy (centre) and former Taoiseach Brian Cowen (right)


THE Department of Finance has provided an "unclear and incomplete picture" into events leading up the controversial bank guarantee in September 2008, according to a confidential report seen by the Sunday Independent.

A wide-ranging investigation into actions and events both before and after the guarantee is intended to address the many unanswered questions that remain.

The "crisis in the domestic banking sector" report was prepared by the Dail's Public Accounts Committee (PAC), which will conduct the investigation.

The report, which will be published on Thursday, states: "Many issues remain to be addressed and many questions remain to be answered."

It adds that a "major knowledge gap" currently exists.

Alongside events surrounding the guarantee, the PAC investigation will also focus on the role of the banks and State institutions in the crisis.

In relation to what is referred to as "crisis management" after the guarantee, the committee will also investigate events surrounding the establishment of Nama, which has been accused of a lack of transparency.

Several prominent people associated with these events will be compelled to give evidence, including the former Taoiseach Brian Cowen; the former AIB and Bank of Ireland cCEOs, Eugene Sheehy and Brian Goggins respectively; and ex-Department of Finance official Kevin Cardiff.

The PAC report states: "Those who had central roles in banking and oversight have not been requested to explain publicly the issues they faced or their decisions and actions in the lead up to and during the crisis."

The investigation will coincide with the Government's efforts to capitalise on an apparent breakthrough in Europe last week to have the €64bn burden of bank debt removed from taxpayers.

Nama has to date paid €32bn for property development loans. The PAC report also estimates that €50bn in shareholder value was lost as a result of the crash.

In relation to the Department of Finance, it states: "Notwithstanding all the reports compiled, a major knowledge gap remains in relation to events leading to the bank guarantee.

"The Department of Finance papers provided to the committee give an unclear and incomplete picture of how events unfolded."

The 290-page report will act as a road map for the PAC, which has secured legal clearance to proceed with the much-anticipated investigation.

The inquiry team intends to focus on the so-called 'bad bank' Nama.

It will ask whether the decision to establish Nama was "fully evaluated" against alternative policy options. It will also ask questions in relation to the 'business strategy' of Nama -- in particular, the prospects for a return on its investments.

The report asks: "On the basis of what information, and provided by whom, was it decided to establish the 'bad bank' programme?

"Why did it not become apparent to the Minister for Finance in the autumn of 2008 that the security and documentation underlying the future Nama portfolio was weak?

"Why were 'individual loan concentrations' so poorly understood? Why were estimated haircuts so much less than the haircuts that were subsequently applied?"

The report also states that the PAC is of the view that the events since September 29, 2008 "all need to be further examined".

These include the recapitalisation of the banks; the nationalisation of Anglo Irish Bank; the establishment of Nama; and "change programmes" initiated by the Department of Finance, the Central Bank and the Financial Regulator.

In relation to the hugely controversial bank guarantee, the inquiry team intends to further examine:

• The precise sequence of events in the weeks leading up to the guarantee.

• To what extent was there adequate evaluation of the alternatives available?

• To what extent was the scope of the guarantee the "optimal policy decision" given other options available?

• What role, if any, was played by the Cabinet in the run up to the events on the night of the guarantee?

• Who were the external advisers during the crisis-management period and what were their roles?

The PAC also intends to examine "crisis management" issues after the guarantee, as well as the role of the banks, external auditors, the Financial Services Regulatory Authority, the Central Bank and the Department of Finance in the bank crisis.

It will also pose questions about the oversight effectiveness of TDs and senators, asking: "Did the Oireachtas do its job properly?"

The report is set to be passed by the full PAC on Tuesday, before being published on Thursday, when a copy will be sent to Public Expenditure Minister Brendan Howlin.

A spokeswoman for Mr Howlin said he strongly supported the holding of an effective parliamentary inquiry into the banking crisis.

The spokeswoman added: "Minister Howlin has received a submission from the chairperson of the finance and public expenditure and reform committee and eagerly awaits the PAC report, which is expected to be finalised shortly. He will review and present to government any proposals for inquiries received from Oireachtas committees in consultation with the Attorney General."

Sunday Independent

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