Anglo crisis 'would still not be detected'
Auditing standards have changed so little in seven years that the problems at Anglo Irish Bank would still not be detected today, a professor of accounting has told the Banking Inquiry.
The inquiry has also heard how inaction by the Central Bank and the Financial Regulator resulted in "costly failure" leading to the banking crisis - and how political bias may have unduly influenced the decision to bring in the bank guarantee.
Prof Eamonn Walsh, Professor of Accounting at UCD, was asked if under current auditing standards Anglo would today still appear as a bank on course for record profits of €500m.
He replied: "It would. There has been no change in standards, so one could reach much the same conclusion today as one would have reached in 2008."
Prof Walsh said accounting standards at the time of the banking crisis "served to obscure the underlying nature of both profits and loan portfolios to external investors and lenders".
Prior to the crisis, he said, it was widely thought that Irish banks were highly profitable and that they had sufficient cushions - but by 2009 it was apparent these were "entirely inadequate".
The "seismic" shift had come when the property sector changed from being dominated by residential mortgages to 50pc commercial loans.
Earlier, economics professor Gregory Connor, from NUI Maynooth, said the bank guarantee was "clearly wrong".
"I think there was political bias. I suspect they thought 'What's best in our political situation?'" instead of looking at it from the public's perspective.
The property development community, he said, "had a very strong relationship with members of the Dáil".
Prof Connor described "light-touch banking regulation" here as the "second-worst in the world" - second only to Iceland at the time. The Central Bank and the Regulator, he said, should have blocked the enormous growth in property lending by domestic banks.
John Drennan's Guide to Politics - Spring 2015
The next election will change your life. In a special supplement with the Sunday Independent, John Drennan presents his guide to Irish politics.
Guide To Politics
- And they're off: the great election race begins but, as to where it ends, sadly nobody knows
- The key issues - Remember tax reform is not illegal, Enda
- It's like a talent show - you have to make the audience want you
- Could our interrupted revolution lie in the humanising of our politicians?
- 'It's awful losing your seat, it's a very public humiliation...'
- Too early to rule out FG/SF Coalition
- Shadowy back room boys and girls with the ear of ministers
- Enda and Joan's shaky house of cabinet cards
- Despite Enda's stated preference Easter 2016 not yet definite
- As they hatch their plans, what might be the hopes and ambitions of our party schemers?
- Battle of the leaders to be key deciding factor in election race
- Spectral scenarios or sweet dreams
- When the fuss is over who will be the winner?
The Gender Gap
The Generation Game