'Nobody took charge to stop bank crisis', inquiry is told

By Clodagh Sheehy

A COUNTRY where no-one was in charge was how German economist Klaus Regling described events leading to the banking crisis.

This lack of supervision was "the bottom line" he told the Banking Inquiry today.

He also agreed that the economic crisis in Ireland could have collapsed the euro.

Mr Regling (inset), who is MD of the European Stability Mechanism and Chief Executive of the European Financial Stability Facility, was before the Inquiry to discuss a report he prepared for the Government on the crisis in 2009.

He said that at the time across the banking sector there was "weak governance and risk management - sometimes disastrously weak".

Internal procedures were often overridden and banks were highly exposed to individual borrowers and property lending. There were bonuses not just for top executives but also middle management and loan officers, he said.

There was also an "absence of forceful warnings from the Central Bank".

In summary, said Mr Regling, "weak financial supervision and bank governance combined with official policies to leave the economy vulnerable to deep crisis".

The supervisory boards of the banks should have asked more questions, the Central Bank should have asked more questions and the government should have taken appropriate action, he told the Inquiry.

"We should not single out one person or one group of actors. All of these actors have to take some of the blame", he said.

Mr Regling referred to the "obsession" with property acquisition in Ireland at the time as one of the "home made" factors which contributed to the crisis.