Neary was John Cleese to Fawlty Towers of Irish regulation
There has always been a touch of Basil Fawlty about the hapless financial regulator, Paddy Neary. He resembles actor John Cleese. He is tall, sports a moustache, seems like a decent man, a bit baffled, but is out of his depth and accident prone.
And there is more than a touch of Fawlty Towers about the antics at the home of Irish financial regulation, as revealed in Friday's stunning report about the internal operation of Ireland's so called banking watchdog.
The place was a shambles.
The probe into the watchdog's response to discovering concealed directors' loans at Anglo Irish Bank reveals a catalogue of errors which would make Basil Fawlty blush.
Mr Neary says he knew nothing about these exotic activities.
Whether or not that is the case, his outfit knew about them last January. Not through any skillful digging of its own, mind you. No, John Cleese-style, his staff stumbled across the extraordinary Anglo loans when checking the books of Irish Nationwide Building Society.
And what did they do?
It is unclear whether the message that Anglo's annual report failed to reflect €87m in loans to chairman Sean FitzPatrick went up the line; but it is crystal clear that the matter was quickly lost in the bowels of the plethora of committees that strangle the activities of the regulator.
The report refers to a multitude of excuses for the inaction. There was the little matter of the "missing letter" from Anglo! There was the "breakdown in internal communications". There was the failure to pursue the matter with Irish Nationwide. There was the pressure on officials from the "unfolding liquidity problems in financial markets".
And the rest.
Worst of all, it is clear that there is a deeply unhappy conflict of evidence about who really knew the Anglo loans story and how far it travelled up the chain of command. Whatever the truth, a picture of chaos emerges -- at the very organ entrusted with ensuring stability.
Even more startling is that no one told Finance Minister Brian Lenihan on September 30, the dark night when the entire financial system was wobbling. He had to find out for himself when browsing through Anglo's annual accounts.
Lenihan questioned the huge loans, then sent for Paddy Neary. The fiasco began to unravel.
If the huge figure for Anglo's directors' loans jumped out of the annual report and bit the minister, why in God's name did it never strike the army of apparatchiks in Paddy's supervision department? Or even poor Paddy himself?
The reality exposes the embedded flaw of Irish financial regulation. The regulator is not conditioned to ask hard questions of the banks. The tradition here is to be their servant, not their supervisor.
Earlier this year Neary had helpfully responded to squealing from the bank bosses about short-selling of their shares, by launching an enquiry. It found nothing untoward, but the bankers were pacified. He even banned short-selling itself, a cosmetic public relations move that failed to stem a collapse in bank shares.
Paddy Neary joined the old Central Bank in 1971. He became boss of the regulator in 2006 after three years as its prudential director.
Paddy's reign has been a benign time for Ireland's bankers. There were serious question marks being asked about his empathy with them long before the Anglo revelations. Last October he appeared before an Oireachtas Committee -- of which I am a member. Several of us at the time had concluded that he was simply not up to the job and sought his resignation. It emerged at that meeting that Irish banks had never been fined a brass farthing by the regulator despite overcharging, foreign exchange and tax scandals. At the same time the UK's watchdog had fined its financial institutions £20m.
Paddy's reassurances at that session -- that our banks were solvent -- left many members stunned.
He seemed complacent about the historically high loans to property developers and the dangers to the banks.
It even emerged that the number of spot checks on the banks was well below target, an ominous omission in the light of the later Anglo loans shock. The cracks were appearing. Paddy's days were numbered, but there was a touch of humanity around the table that day. TDs and Senators actually felt sorry for him.
But financial markets are no home for humanity. Sean FitzPatrick's €87m hidden loans merely provided the final straw on the back of a regulator already destined for an early bath. Most seriously of all, foreign confidence in Irish regulation has been tumbling.
A cruel piece in the Financial Times in December dubbed bank regulation here "Cosy Irish capitalism at its worst". The New York Times has branded us "The Wild West of European finance".
Paddy Neary's replacement will be crucial. We should start the process of appointing external candidates to key positions. A complete outsider, untainted by past friendships, longstanding links with bankers or thirty-five year careers in a regulator that has always been far too close to the banks, is essential.
Ireland cannot afford another John Cleese clone.