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No room for Wild West in future

Bloxhams, one of the oldest stockbroking companies in Dublin, has disappeared from the scene after the discovery of "financial irregularities" in its accounts. At first glance, the news comes as a shock.

A 150-year-old firm goes out of business, with the loss of 50 jobs and leaving the inevitable question: how did it take five years to discover that something was wrong?

A similar question was asked last October, when Custom House Capital collapsed. But there is one very striking difference between the two events.

Custom House investors were left at risk of losing large sums of money, in some cases several millions. Bloxhams customers do not face a similar fate.

And the affair presents another encouraging aspect. For there is an answer to the question why it has taken so long to unearth many defects in the Irish financial world -- with, no doubt, many more to come. Part of the answer lies in the recent past, another part much further back.

In 2005 the 'New York Times' called Dublin the "Wild West" of European capitalism. Most countries would have sat up and taken notice of such criticism from one of the world's leading newspapers. Not Ireland. The governments led by Bertie Ahern and Brian Cowen ignored it.

Why? Because Mr Ahern and his first finance minister, Charlie McCreevy, were entranced by the concept of "light-touch" regulation, meaning no regulation whatever. Since the crash of 2008, to which that folly contributed so much, we have learned from our mistakes.

The Financial Regulator, Matthew Elderfield, with the Governor of the Central Bank, Patrick Honohan, behind him, is digging his way through the financial Augean stables which they have inherited. The process is slow, laborious, and horribly expensive. At every turn, they find the task bigger than they imagined, as witness last week's revelations about the mortgage crisis.

But they are doing the right thing, which is as much as to say that we as a society are doing the right thing.

There will always be incompetence. There will often be fraud. No government can change human nature. But much of the damage can be prevented, and most of it can be repaired.

We are repairing it now, with great pain and at great cost -- and unknown cost, because we do not know the ultimate price of the biggest part of the operation, recapitalising the banks. We should welcome the fact that the Central Bank has managed, in addition, to investigate one small part of the financial system.

And we should not fear for our reputation abroad on foot of this incident. Foreign governments, the European Union, the markets of which we hear so much, will cheer on our efforts at exposure and correction. That alone is worth the price.

Irish Independent