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Nyberg report: who was in charge?

Last Tuesday, moments after its publication, the Finance Minister, Michael Noonan, said that while the Nyberg report is written "very diplomatically", it is quietly devastating. He was correct.

Using broad conclusions of 'herding' and 'dangerous consensus' enabled the Finnish bureaucrat to get away with not naming individuals, thus avoiding being dragged into the murky world of Irish blame politics.

However, there is no doubting as to who he blamed for Ireland's worst ever financial crisis. Peter Nyberg's failure to explicitly name those responsible for this depression while predictable from a career civil servant, is nonetheless extremely disappointing to Irish taxpayers.

Nyberg said in his report: "Decision-makers and leadership in the various institutions must carry a large part of the immediate blame for the crisis." Today, we look at those who were at the head of each of the key institutions involved in the greatest financial scandal this country has ever known.

1: The Authorities

Brian Lenihan in the Dail last Wednesday said Nyberg's conclusions were damning for the various state authorities involved in the crisis. While the former finance minister, keen to absolve himself of blame, was engaging in a shameless passing of the buck exercise, he was correct in that Nyberg's judgement of the Central Bank, the Financial Regulator and the Department of Finance was devastating.

a) Financial Regulator/Central Bank:

What Nyberg said: "Macroeconomic developments were already exhibiting signs in 2005/6 that should have caused concerns in the Central Bank. However, it did not take required action. There may have been a state of denial in the CB."

Who was in charge:

"The Commission found no evidence (between 2003 and 2007) that the bulk of problems within the banks received the necessary attention of the regulator."

Who was in charge:

"Given that the regulator didn't perform the required detailed scrutiny . . . it's unlikely that it would have formed an adequate understanding of bank exposures or risks . . . No administrative sanction was taken by the regulator until after the guarantee . . . This inactivity had serious consequences for the banking sector."

Who was in charge:

"Not only did the Central Bank seriously underestimate the nature and extent of risks in the Irish financial system, but it was content to express only nuanced and somewhat indirect concerns."

Who was in charge:

"A closer look at bank balance sheets (from mid- 2000s) could have uncovered a number of imprudent practices and unacceptable risk exposures. However, this did not happen.

Who was in charge:

"It is difficult to fully understand why the alarming macro-economic signs detailed were regarded with such relative calm for so long by the Central Bank."

Who was in charge:

"As late as September 29, 2008, (and indeed for some time afterwards) the position of the Central Bank and the Regulator seems to have been that Irish banks all remained solvent."

Who was in charge:

b) The Department of Finance:

What Nyberg said:

"In 2004, a brief prepared for the minister urged restraint in terms of growth in expenditure and tax reliefs. However, it was silent in relation to credit growth."

Who was in charge:

"No single comprehensive analysis integrating all the risks was carried out."

Who was in charge:

Considine/Doyle

"The ESRI said in 2007, the astonishing growth in net foreign borrowing by Irish banks since 2003 had been used to fund the ongoing boom and that the situation was not sustainable. This point does not appear to have been followed up by the department or brought to the attention of the minister."

Who was in charge: Doyle

2: The Politicians:

What Nyberg said:

"The Government actively supported the [property] market over an extended period against the apparently weak opposition of the Department of Finance."

Who was in charge:

"Despite significant political pressures operating in the opposite direction, advice on restraining expenditure should have been more vigorously articulated."

Who was in charge:

"Between 2005- 2007, the minister was informed that the continued rise in house prices posed a serious threat."

"Proper information is a precondition for any crisis management based on reality. As it turned out, decisions [on the night of the blanket bank guarantee] were made on the erroneous assumption that all banks were and would remain solvent."

Who was in charge:

"If accurate information on banks' exposures had been available, it seems a more limited guarantee combined with a state takeover of at least one bank might have been more seriously contemplated."

Who was in charge:

3: The Banks

a) Anglo Irish:

What Nyberg said: "Contrary to pubic perception at the time, lending at Anglo proceeded with insufficient checks and balances."

"In Anglo, credit risk management structures were deficient and there was ineffective overview; Anglo was a monoline bank focused almost exclusively on commercial property lending; Anglo found it difficult to decline a loan to any of its top customers; reporting to management of credit risk was deficient."

"In 2007, the responsibilities of the chief risk officer were assumed by the finance director. This decision would suggest that risk management was not appropriately prioritised within the bank."

"Most Anglo board members did not appear to have sufficient experience or specialist knowledge to recognise the risks attached."

b) Irish Nationwide:

CEO Michael Fingleton 1970s - 2009

Chairman Michael Walsh 2003 - 2009

What Nyberg said:

"At INBS, a number of essential independent functions either did not effectively exist or were seriously under-resourced."

Who was in charge: Fingleton

"INBS's business model was unique; it involved providing 100 per cent finance to experienced and proven property developers; it was closer to that of a venture capital financier than of typical banks; the MD had been given extraordinary powers by the board and many staff reported directly to him. This delegation of powers was most unusual given its vague formulation. It is not immediately apparent what the limits to this empowerment were."

Who was in charge: Fingleton

c) AIB/Bank of Ireland/EBS:

CEOs Michael Buckley 2002-2005 and Eugene Sheehy 2005-2009 (AIB); Mike Soden 2002-2004 and Brian Goggin 2004-2009 (BoI)

Chairmen Dermot Gleeson 2003-2009 (AIB); Laurence Crowley 2000-2005 and Richard Burrows 2005 - 2009 (BoI)

What Nyberg said:

The boards feared that if they did not yield to the pressure to be as profitable as Anglo, in particular, they would face loss of long-standing customers and a loss of professional respect."

Who was in charge: AIB/Bank of Ireland/EBS

"In many cases, documentation of discussions among board members over the period was insufficient."

Who was in charge: Boards of AIB/Bank of Ireland

"Both banks viewed Anglo as a major threat."

Who was in charge: AIB and Bank of Ireland

"EBS in particular made an explicit decision to take on more risk in 2005, when it made a concerted effort to grow its property development business."

Who was in charge: EBS CEO Ted McGovern

"At CEO level, the depth of hands-on lending expertise required to appreciate the full scale of risk was modest."

Who was in charge: Sheehy, Goggin & McGovern

4: The External Auditors:

What Nyberg said: "Auditors didn't feel that commenting on the implications of such business model problems fell within their proper remit. In fact, it may be questioned whether they even saw them as problems since very few others appear to have seen them either. On these issues, they appear generally to have stayed silent."

Who was in charge:

KPMG - auditors for AIB, Permanent TSB and EBS since 2009;

Ernst and Young - auditors for Anglo Irish Bank and EBS (up until 2008);

PricewaterhouseCoopers - auditors for Bank of Ireland

Sunday Independent