Tuesday 22 January 2019

If you didn't laugh . . . accountants manage to see funny side of crisis

Laura Noonan

ONE imagines laughter isn't a sound Central Bank Governor Patrick Honohan hears too often these days.

So it must have been a pleasant surprise yesterday morning when he reduced an audience to peals of laughter. And an audience of straight-laced accountants, no less.

The source of the merriment, though, was a deadly serious topic.

Asked about the prospect of foreign ownership of Ireland's banks, Professor Honohan answered with characteristic frankness.

"They're for sale as far as I'm concerned," he said bluntly, inadvertently triggering the accountants' mirth.

The levity didn't last for long though as Prof Honohan was quickly brought back to the sobering reality of Ireland's predicament.

Having been in the job for about 14 months now, he's played his part in the 'war cabinet' charged with getting to grips with the financial situation.

"Plan A", as he calls it, was to move the banks' toxic assets into NAMA (National Asset Management Agency), shore them up with state capital and then get them to raise a further capital buffer to prepare for future losses.

"Well, we didn't manage it," Prof Honohan said bluntly, admitting the plan had become "less plausible" as far back as April when the sovereign debt crisis began.

In an almost stream-of-consciousness style, he pondered the various steps taken along the way.

NAMA's transparency meant it was a much better approach than "an attempt to cover up" the scale of the banks' losses, he stressed.

But the "very protracted period of loan purchases" clearly frustrates him, and the market response has led him to the unavoidable conclusion that Nama "hasn't had the result that we thought it would".


Then there's the Central Bank's decision earlier in the year to set adequate capital levels for Irish banks, rather than flooding them with excess capital as is being proposed now.

"Should we have put in more capital in March?" Prof Honohan pondered. "It's hard to justify that... There would have been consequences (for that) which you can think about."

That's not to say Prof Honohan is from the je-ne-regrette-rien school of leadership. "I wish we had been able to find decisions and implement them faster," he said pensively.

"I think the steps (we took) were as good as could be taken, but I think that they could have been taken faster ... That's my main regret -- that we could have worked faster."

He added: "I don't think we've taken steps which have worsened the situation, but I think we have taken steps which have not yet been sufficient to restore the situation."

With the stakes running to hundreds of billions of euro and hundreds of thousands of Irish jobs, the inability to "restore the situation" is no laughing matter.

Irish Independent

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