Ruinous banks won't apologise or even explain
No heads have rolled yet, but banks need to rebuild confidence as much as balance sheets, says Colm McCarthy
There have been three official reports into the implosion of the Irish banking system, most recently the long-awaited Nyberg report. Central Bank governor Patrick Honohan prepared a detailed document focused on the failures in regulation and supervision while the Regling/Watson report was mainly about macroeconomic policy errors. But there has been no comprehensive explanation of what went wrong in the banks and the Nyberg report sadly did not deliver. The balance sheets of the surviving banks have been rebuilt at extravagant cost to the taxpayer, but their credibility has not.
Economic recovery requires a functioning banking system as well as a visible exit from the deficit crisis. Ireland has made limited progress under both headings. The sheer scale of the credit-fuelled property bubble and consequent collapse of the banking system is what distinguishes Ireland from the other casualties of the financial crisis. Some countries mismanaged their public finances and several permitted excessive credit growth and incurred severe bank rescue costs.
Ireland did both, with a banking rescue that has cost the Exchequer, relative to the country's economic capacity, far more than in comparable countries and resulted in the effective insolvency of the state.