'We had one shot to get it right', says Cowen of bank guarantee night

The Fianna Fail politician has been giving evidence at the Banking Inquiry this morning and has defended the guarantee as the most decisive step the government could have taken on the night to deal with the problem.

"It was clear we were on our own on the night of guarantee," Cowen said. "We had one shot at it, or Ireland could have been set back 25 years."

Mr Cowen apologised to the Irish people for the hardship caused as a result of guarantee.

crisis

"I accept full and complete responsibility for my role and our response to that crisis," he said.

He was sorry that the necessary measures "brought with it hardship and distress to many people" and said "the human cost was the most difficult aspect of the decisions we had to make".

The former Finance Minister stressed that he wanted to make it clear from the beginning that nothing he said to the Inquiry "should be interpreted in any way as an attempt to pass the buck to anyone else".

The government of the day, he added, had dealt with the financial crisis to the very best of its ability. No option looked good at the time and it was a case of "taking the least worst option", he said.

Mr Cowen also agreed with Central Bank Governor Patrick Honohan that the primary responsibility for the crisis lay with the banks themselves.

There was reckless lending by individual banks made worse by a bonus culture.

Mr Cowen said the €34bn cost of Anglo Irish Bank and Irish Nationwide Building Society would not be recovered but had they collapsed, the effect would have been catastrophic.

It was becoming clear since that there was no solution free of risk, he added. At the time, the government did not have the benefit of hindsight and "no doubt there were failures at the time on the domestic front.

"We must learn from this difficult experience and make sure it never happens again," he added.

Lessons had now been fully taken on board and policies implemented to ensure that a banking crisis can never happen again in Ireland.

"While government shares responsibility for its role in these mistakes, it is noteworthy that many of the strongest critics were silent on these issues prior to the crisis and indeed were proposing measures such as the radical reduction or abolition of stamp duty which would have made the position much worse," he said.

Mr Cowen said there was "clearly a culture of deference in operation between the Financial Regulator and the Financial Institutions it was regulating".

He said he agreed with the findings of the Nyberg Report "which asserts that the policy apparatus was complacent".

"As Minister, I should also have been more doubting, more questioning by challenging the broad consensus of opinion that had developed on these matters," he said.

boom

He also agreed with the conclusions of the Regling and Watson Report that banking practices, governance failings and financial supervision "seriously exacerbated Ireland's credit and property boom".

This had "left the economy vulnerable to a deep crisis and depleted its fiscal and banking buffers when the crisis struck".

Mr Cowen believed that there should have been "more robust, independent work and scenario planning" by both the Central Bank and the Financial Regulator regarding the banking system.

This would have allowed the Central Bank, Financial Regulator and the Department "to develop timely, strategic, interventionist policies and strategies".

There was also a lack of analysis by both the Central Bank and the Regulator in challenging the over concentration of risk in property, he said.