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Neary is not the only one with questions to answer about our banking shambles

News of former Financial Regulator Paddy Neary's assurances to ministers that the Irish banks were solvent, just days before the Government had to unconditionally guarantee their deposits, once again raises serious questions about who knew what and when.

At a meeting on September 25 attended by Taoiseach Brian Cowen and Finance Minister Brian Lenihan, Neary apparently assured those present that, while the Irish banks faced a liquidity problem -- that is, they couldn't roll over short-term loans from other banks on the international financial markets -- they did not have a solvency problem, ie they weren't broke.

We now know that this was not the case.


Anglo Irish and the Irish Nationwide were hopelessly insolvent, with AIB and the EBS not far behind.

Only Bank of Ireland and Irish Life & Permanent seem to have maintained even a distant relationship with solvency.

The State will have to pump more than €22bn of fresh capital into Anglo, stuffed to the gills with bad property loans that will never be repaid, while NAMA will spend a further €20bn buying some of its bad loans. It was eventually nationalised in January 2009.

Meanwhile AIB has had to offload €23bn of bad loans to NAMA.

Unless it can raise €7.6bn of fresh capital by the end of the year, it too faces the likelihood of de facto nationalisation.

Neary's confidence in the solvency of the Irish banks was rapidly overtaken by events.

On September 30, just five days after Neary assured ministers that the Irish banks were merely facing a little local difficulty, the Government was forced to unconditionally guarantee their deposits, exposing the taxpayer to a potential liability of up to €440bn.

This was merely the start of a slippery slope which has also seen the government forced to recapitalise most of the major banks, nationalise Anglo, Irish Nationwide and the EBS, and establish NAMA.

Even assuming the deposit guarantee isn't called, the total cost to the taxpayer will still be in the region of €80bn, almost three times annual tax revenues.

As the scale of the Irish banking disaster emerged it suited politicians and other officials to dump all of the blame on to the unfortunate Neary, who was forced to "retire" in January 2009.

While Neary certainly has a case to answer, the notion that he was flying solo as the Irish banking system crashed and burned beggars belief.


Neary was part of tightly-knit circle which also included ministers and senior officials.

As the share prices of the Irish banks nosedived from the middle of 2007 onwards and the banks found it increasingly difficult to roll over short-term loans from other banks, ministers and officials would have been in regular, sometimes daily contact.

The idea that Neary kept everyone else in the dark about what was going on is utterly nonsensical.

As a Central Bank lifer, Neary would have known many of the other officials, socially as well as professionally, for years and in some cases decades.

Paddy Neary as the Lone Ranger? Don't make me laugh!

No, other people knew, or at least had a very good idea of what was going on.

Who were these people and when did they know?

If they did know. why did they apparently do nothing? Why, in apparent violation of the first law of bureaucratic survival -- cover your back -- did the officials not warn their political masters of the scale of the unfolding catastrophe?

Will Neary, who has been cast in the role of fall guy in this affair break his well-rewarded silence and reveal all to the inquiry into the banking crisis?

If he does a potentially appalling vista opens up.

If Neary was merely part of a wider effort to conceal the true nature of the Irish banking collapse from the outside world, then investors who bought the shares and bonds of the Irish banks at any time from the start of such a cover-up to when the full truth finally emerged, would have a very strong case for compensation.

If you think things are bad now, brace yourself, they could get an awful lot worse.