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Dan White: We've seen quite enough reports on banks fiasco. Now let's see heads roll

An official report going to Cabinet today is expected to blame the Central Bank and the Financial Regulator for failing to rein bank lending during the boom. But after three reports it's time for action with those who failed to do their jobs being made to pay the price.

Today's report on the Irish banking crisis by Finnish banking expert Peter Nyberg is expected to blame both the Central Bank and the Financial Regulator for not doing enough to stop banks from lending recklessly during the property boom.

To which, with all respects, I am tempted to add, tell us something we don't know.



CAPITAL

We all know that the Financial Regulator didn't regulate and, up to almost the very moment that the banking crisis struck two-and-a-half years ago, the Central Bank was assuring us that the Irish banks were "well capitalised".

So well capitalised in fact that they have since required an extra €70bn of fresh capital!

Today's report is the third investigation into the causes of the Irish banking crisis.

Last July, two separate reports, one by Central Bank governor Patrick Honohan and the other by Klaus Regling and Peter Watson, were published. After two-and-a-half years and three reports Irish taxpayers, who will be paying for the banking crisis for generations to come are entitled to ask when is there going to be some follow-up? Apart from former Financial Regulator Patrick Paddy Neary, who was forced to "retire" in February 2009, no official has been made to pay the price for his or her failures.

Even Neary's path was smoothed by an annual pension of €143,000 and a massive €630,000 lump sum. His boss, former Central Bank governor John Hurley, who "presided" over the Irish banking system, actually had his term of office extended by six months until Honohan was appointed to the job in September 2009.

Of course, this failure to punish those who didn't do their jobs properly isn't confined to the public sector. The AIB report, which is due to be published this week, is expected to reveal that former managing director Colm Doherty, who was forced to quit last November, received a €707,000 payoff from the bankrupt bank plus a €2m pension top up. When the €432,000 he was paid last year is added the total comes to a truly obscene €3.14m.

While the three reports serve a useful purpose they all manage to avoid the taboo subject.

Which is, of course, what contribution, if any, did Ireland's membership of the euro make to the banking crisis?

Yes, we know that regulatory failures at the Department of Finance, the Central Bank and the Financial Regulator, were partially responsible for the mess but could any regulator, no matter how good at their job, have prevented Irish bankers and their customers from going completely crazy in the wake of the tsunami of cheap credit unleashed by our membership of the euro?

I, for one, very much doubt it.

Not alone did euro membership halve Irish interest rates in 1998, it effectively removed any limit on the amount that the Irish banks could lend to their customers.



CRISIS

Until we joined the euro, Irish bank lending was effectively capped by the amount the Irish banks collected in deposits.

After we joined Irish banks could borrow virtually infinite amounts from other eurozone banks.

As a result, Irish bank lending grew almost seven-fold in the decade to the end of 2007 while deposits merely tripled.

At the same time the proportion of Irish bank lending funded Irish bank deposits fell from 90pc to 45pc.

The contribution of our euro membership to the banking crisis is going to become a hotly debated topic in the coming weeks and months.

In the meantime the time for reports is over. Those who failed in their duties, and there were many, must be made to pay the price for not doing their jobs properly.


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