TDs seek fines and bans for directors of failed banks

Heavy fines and work bans should be slapped on directors of failed banks amid concern that white-collar crime laws here are weak, according to a report by the Public Accounts Committee.

The Department of Finance is not “fit for purpose”, it warned, adding that €122m in fees have been paid to external consultants advising state bodies on issues linked to the banking crisis.

The PAC’s draft report on bank stabilisation, obtained by the Irish Examiner, produced damning findings against civil servants, the department, and regulators. It looked at the banking crisis, the decisions made, and the future of banking.

Some findings will diminish hopes that the pending banking probe will deliver results, including the fact that inquiries are being “hampered” as key public officials in charge of oversight have retired.

The report looked at decisions leading up to the Sept 2008 guarantee, how the State dealt with the crisis, and efforts to strengthen enforcement laws.

It was very critical of the Department of Finance. It had a lack of qualified staff, an unchallenging culture, and failed to focus on systemic risks. It was not “fit for purpose”, it says.

The report is expected to be launched next month. Other findings include:

* Irish law is weak on enforcement in the finance sector when it comes to fines and bans, and there is no provision for reckless trading or presumptive sanctions for directors of failed banks. The Law Reform Commission should review this;

* The night of the bank guarantee is still shrouded in mystery and there was no written proposal brought by senior bank chiefs in Bank of Ireland and AIB on the night when they argued for a guarantee;

* There was a lack of detail on the true position of the banks just before the guarantee, the financial regulator was “exercising inadequate supervision,” and a proper analysis of loan books was not done;

* Questions remain about why dated subordinated debt was included in the guarantee and no records of this decision were made available to PAC;

* Department of Finance information shows €122m has so far been spent since 2008 on consultancy costs for financial, legal and accountancy services linked to managing the crisis.

The report concluded there will likely be a “very insignificant recovery” of the €35bn shovelled into Anglo Irish Bank and “there is still a long way to go before we have an efficient and effective banking sector”.

In the report, PAC chairman John McGuinness said: “We still do not have a properly functioning banking sector, and while we have reformed the systems of oversight, these need to be regularly assessed to ensure that there is no slippage back into old ways of doing business.”