Sunday 17 February 2019

State inquiry into our financial collapse will not end culture of secrecy in Central Bank

Central Bank governor Patrick Honohan
Central Bank governor Patrick Honohan
Ivan Yates

Ivan Yates

IN the aftermath of the Anglo Irish criminal trial, there was a singular, breathtaking moment. It occurred in the offices of Ireland's most powerful institution, but one which remains its least accountable and most secretive.

Governor Patrick Honohan was asked by financial journalists to respond to Judge Martin Nolan's criticisms of Patrick Neary and the prospects of any disciplinary action against any former staff of the financial regulator. "I won't go there" was his curt, dismissive response to human resource issues, point-blank refusing to discuss any level of accountability or sanction. Nobody was ever censured. The public has to make do with his vague, generalised reassurances that the collapse of our banking system in 2008 would not recur now. It's time to fundamentally review the Central Bank. More important than any banking inquiry is the urgent need to reform the culture in Dame Street.

The Central Bank is not subject to Freedom of Information legislation, despite this being the case in other European states. Patrick Honohan restricts himself to less than a handful of media interviews a year. He is addressed as "Governor" in all dialogue – reminiscent of some localised demigod of the British Empire. This undeserved deference has to stop. Patrick Neary is the public face of catastrophic regulatory failure. However, the institution to blame is the Central Bank. Let's recall the regulatory arrangements: in 2003 the Irish Financial Services Regulatory Authority was established; it was notionally a separate division of the Central Bank; four of its directors came from the Central Bank; on October 1, 2010 full regulatory powers returned under the one roof of the Central Bank. The culture of the Central Bank is deeply offensive to the Irish people through its approach to confidentiality. Detailed questions about solvency of individual credit unions are subject to the standard response of "no comment". A wall of silence.

Mr Honohan was supposed to herald a new area. He was an academic, outside the cosy career path of former Department of Finance secretaries who became governor (eg Maurice Doyle, Maurice O Connell and John Hurley). He was formerly economic adviser to Taoiseach Garret FitzGerald in early 1980s. Appointed in 2009, he began revealing the truth about bailout realities and national insolvency in 2010. However, he's gone native in terms of institutional information concealment. He must face robust questioning about inherent conflicts of interest within the Central Bank. It is expected to square circles of prudential supervision while simultaneously being bank of last resort to Ireland's indigenous banks. Past stress tests by it proved woefully inadequate.

The Central Bank refuses to provide adequate explanations about the collapse of Setanta Insurance. It transpires when 75,000 motor insurance policyholders (mostly relating to vans) were left without cover, that regulators were in Malta despite all the company business being in Ireland.

Claimants on policies and investors in the company face the prospects of horrendous losses, yet no protection is being proffered by our Central Bank.

Also, bank accounts of Asset Management Trust were allegedly frozen by the Central Bank over recent weeks, apparently involving tens of millions of euro. No information about inherent problems, causes, or likely outcome is forthcoming from Dame Street.

People's cash has never been tighter due to government austerity and banks' de-leveraging, sucking money out of circulation, but the Central Bank had record profits of €1.5bn last year. Questions of productivity arise within the Central Bank, which has increased its staff by 600 personnel to 1,400. Yet the number of banks it has to supervise has greatly reduced with the exodus of BOSI, Danske Bank and ACC. All banks here are contracting their scale of operations. Remarkably, the Central Bank carries out its own internal assessment of staff quality on an annual basis. Surprise, surprise . . . they have awarded themselves top marks, resulting in an extra day off.

How come no officers of the Office of Director of Corporate Enforcement or Garda fraud squad ever accessed Central Bank offices to establish the levels of official compliance with the Maple 10 Anglo share scheme? This illegal venture under Section 60 of the 1963 Companies Act was found to be criminal, but those convicted faced no prison sentence because a 'state agency' led them to the rescue operation. The 'Big Daddy' of this state agency, the Irish Financial Services Regulatory Authority (IFSRA), was the Central Bank.

Patrick Neary stated that on 82 occasions in the recent Anglo trial there were variations on themes of non-recollection. Why hadn't anyone in the Central Bank ever quizzed or reprimanded him and Con Horan about their state of knowledge? The Central Bank has escaped any level of scrutiny for its role, yet to this day we continue with the same reverential approach to that institution. It is simply not good enough for Mr Honohan to merely describe the fiasco as a "sorry story".

Is the Central Bank currently the downtown Irish office of the Bundesbank? What is its level of real national autonomy as we move towards full convergence of the single euro currency? Do these guys still wear the green jersey, and if so how can we assess their actions? Their arrogance is an affront. It is easier to kick around the Catholic Church and An Garda Siochana than confront the Central Bank. Eddie Molloy, a credible organisational consultant, tells us recommendations for cultural change in the Central Bank never permeated the upper echelons – merely for the staff. Any banking inquiry that confines itself to a rear-view mirror historical analysis is pointless. If it does not tackle head-on the imperious disdain on display in real time from the Central Bank, it's a joke. It remains the worst bastion of excluding democratisation. The prospects of a European Banking Authority will at least allow some transnational standards of openness.

Mr Honohan cannot hide behind outdated traditions. It's time we demanded that the Central Bank provides proper, contemporary transparency. The cloak of independence cannot mean immunity from probes.

Irish Independent

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