Sunday 17 December 2017

Cowen ready to cave in on banking crisis probe

Michael Brennan and Aidan O'Connor

THE Government is set to finally cave in to demands for an inquiry into the causes of the near-collapse of the banking system.

The issue of restoring confidence in the banking system was brought to the cabinet table yesterday by Taoiseach Brian Cowen, who had previously resisted committing to a banking inquiry.

He and his ministers are set to sign off on the exact type of inquiry at next week's cabinet meeting, after engaging in an intensive discussion on the issue yesterday.

But the banking inquiry may not get under way immediately, with the Government expected instead to declare it wants time to deal with the transfer of the banks' toxic property loans to the National Asset Management Agency (NAMA) first.

It has not yet been decided if the inquiry will be carried out by a Dail committee (along the lines of the DIRT inquiry), a commission of investigation (along the lines of the investigation into clerical sex abuse in the Dublin Archdiocese) or another format.

But a government source last night definitively ruled out the prospect of another tribunal, pointing to the imminent publication of the Moriarty Tribunal report into the awarding of the second mobile phone licence -- 11 years after it was established.

The Government may also argue that the Director of Corporate Enforcement's investigation into Anglo Irish Bank needs to be concluded before the banking inquiry begins.

Last night it emerged that Kevin Cardiff, a senior civil servant involved in the creation of NAMA, was being appointed to head the Department of Finance.

He is involved in the department's taxation and financial services division, and will replace the current secretary general David Doyle, who is retiring. It comes in the wake of last month's call for a banking inquiry by the new Central Bank Governor Patrick Honohan and a sustained campaign of pressure by the opposition parties.

The inquiry is expected to focus on the causes of the excessive lending by Irish banks which led to the Government being forced to give a state banking guarantee worth €440bn in September 2008 and to set up NAMA to take toxic property loans worth up to €54bn off their books.


A government spokesman said the issues discussed yesterday by the Cabinet included the "obvious need to learn lessons from the events that led to current problems". Finance Minister Brian Lenihan, who has previously expressed support for a banking inquiry, is now due to bring forward a "framework" for how to set it up, based on the discussions to next Tuesday's cabinet meeting.

On the same day he is expected to announce the Government's decision to set up an inquiry to the Dail.

Labour leader Eamon Gilmore said last night the banking system could not be fixed without first knowing what went wrong.

"If we are to restore public confidence it is essential that we find out exactly what went wrong and then take appropriate steps to ensure that it can never happen again," he said.

Fine Gael leader Enda Kenny has also backed calls for a banking inquiry and has accused senior Fianna Fail figures of being "afraid" to hold one. He has called for a inquiry similar to the Committee of Public Accounts investigation into Deposit Interest Retention Tax (DIRT) evasion by banks.

The Labour Party yesterday published a draft bill that would allow an Oireachtas committee to enquire into what went wrong in the banking system.

Mr Lenihan has previously cast doubt on the likelihood of an Oireachtas committee carrying out the inquiry by saying he does not want a "political circus". However, a government source said last night this type of inquiry could not be ruled out.

Labour's move on the banking crisis came as an inquiry into the financial crisis got under way in the United States.

The chiefs of Wall Street's largest banks will give evidence before the US Congress's Financial Crisis Inquiry Commission, established to probe how the US banking system was brought to the verge of collapse.

The move also comes in the wake of an Irish Independent investigation, which revealed Anglo Irish Bank gave loans to a host of high-profile sporting and business figures for luxury apartments in New York, just before the global financial crisis began.

Irish Independent

Promoted Links

Today's news headlines, directly to your inbox every morning.

Promoted Links

Editor's Choice

Also in Irish News