Saturday 21 April 2018

Ex-banker urges former colleagues to step down

Former Bank of Ireland chief Mike
Soden who resigned in 2004
Former Bank of Ireland chief Mike Soden who resigned in 2004

Ronald Quinlan Exclusive

THE former chief executive of the Bank of Ireland, Mike Soden, has called for the country's banking chiefs to "do the honourable thing" and resign, claiming they have presided over the demise of the country's leading financial institutions.

Speaking exclusively to the Sunday Independent, Mr Soden said the time had come to "address openly the tenure of the banks' boards and executives"; and he questioned whether those in charge should be given the chance to reverse what he described as the "dreadful circumstances" the banks find themselves in.

The 60-year-old career banker's demand for accountability is all the more interesting given his own difficult decision to resign from the helm at Bank of Ireland in 2004 after an internal investigation found he had accessed inappropriate internet sites on his work computer. The bank's current chief executive, Brian Goggin, succeeded Mr Soden -- having served under him as the Bank of Ireland's Chief Executive of Asset Management Services.

While Mr Goggin isn't singled out for criticism by his predecessor, equally there is no sign of any praise for him personally in Mr Soden's remarks.

Commenting on the response of Ireland's present generation of banking leaders to the deepening financial crisis, Mr Soden said: "Who should take responsibility for what has happened? Who should be accountable? Are the leaders of the banks in such a state of denial that they don't believe there are many consequences to be faced with the destruction of 90 per cent plus of the market capitalisation of the banks?

"Should those who were in charge when the crisis arose be given a chance to reverse these dreadful circumstances? Can we trust those who were in charge over the past five years to make informed decisions on the future of banking in Ireland? This is the time when we should address openly the tenure of the boards and the executives who had been on the scene since the demise of the Irish banks. Hopefully, someone will do the honourable thing."

The demand for a cull of the nation's boardrooms represents just one aspect of the former Bank of Ireland chief's thinking on the deepening crisis in our financial system. Mr Soden -- arguably Ireland's most experienced and qualified banker -- believes the Government has four options from which to choose as it goes about the arduous business of restoring the nation's financial services.

Central to these proposals is the use of international funds from private investors, which he says provide an "excellent instrument at driving inefficiencies out of poorly-capitalised and poorly managed institutions".

Bolder still is Mr Soden's proposal that the country's biggest banks be broken up into their component parts and floated separately on the stock exchange as individual insurance companies, fund management companies, mortgage banks, and international activities.

Significantly, this proposal would require the various institutions to hold on to their commercial property portfolios with capital raised through other flotations being used for recapitalisation.

While doing nothing is also an option, Mr Soden believes the cost of such inaction would be too high as it would merely leave us dependent on the hope that the global markets will turn around positively in a short period of time.

A more attractive option for the former Bank of Ireland chief is the prospect of immediate recapitalisation of the banks and a similarly urgent writedown of their commercial property portfolios.

Mr Soden says: "Action in this situation is essential and will force issues to be addressed rather than deferred. This option will take into account some variation of the variety of domestic mergers that are being aired in the press at the moment.

"Domestic mergers carry a heavy concern with regard to domestic competition and the consumer. In whatever event occurs, the price paid for some deterioration in competition may be worth the final outcome for financial services."

The use of international funds is Mr Soden's third proposed option. On this, he says: "The major shareholders in most of the banks are international. In good times, we could not get enough of their funds to purchase our shares in the open market. Turning our backs on foreign equity as a means of restoring strength to our financial markets could be foolhardy.

"Private equity is an excellent instrument at driving inefficiencies out of poorly capitalised and poorly managed institutions."

The fourth and final option, according to Mr Soden, would see Ireland's main banks broken up into their component -- and potentially more profitable -- parts.

He adds: "With the new entities that emerge -- separate insurance companies, separate fund management companies, separate mortgage banks and international activities -- investors would then be given the opportunity to invest in those preferred financial activities that they believe have better futures."

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