Regulator refuses to quit despite criticism

FINANCIAL Regulator Patrick Neary insisted he should not have to resign after a number of politicians questioned his suitability for the job in light of recent financial turmoil.

During questioning at the Oireachtas Committee on Economic and Regulatory Affairs, Mr Neary admitted yesterday that the Irish financial system owes almost €69 billion to the European Central Bank (ECB) and could yet need to be partly nationalised to remain solvent.

He also insisted he only ever acted in the best interest of the public, after his position was called into question by the committee.

Mr Neary was grilled on why he did not do more to prevent the financial turmoil that led to the Government promise of a €440bn guarantee for Irish banks.

Mr Neary was also quizzed on why banks continued to engage in irresponsible lending that has left some unable to make mortgage repayments.

During questioning, Fine Gael TD Leo Varadkar suggested because of the €69.3bn owed to the ECB, the only thing that prevented Ireland from “going bust like Iceland” was membership of the EU.

The committee heard that six Irish banks have speculative lending on construction and property development totalling over €39bn.

Of this, €15bn is secured only by the property for which the loans had been granted.

A further €24bn was secured by additional assets, however, some of these were also based on property which has devalued by up to 30% in recent months.

Mr Neary admitted “there will undoubtedly be some losses on these exposures”.

But, he said: “Any such losses would occur over a number of years and would be offset by profits on performing loans over the same period.”

The regulator was adamant, however, that “all banks are solvent and that all savings and deposits are fully safe and secure.”

Senator Shane Ross said: “I personally feel you should resign. And I feel you should have resigned some time ago. It is very important that the financial regulator has the confidence of the people of this country above everything else. And it’s quite clear that you don’t have the essential confidence which is necessary.”

He said: “There is a tradition in this country of the central bank and the financial regulator being too close to the banks.

Labour party TD Sean Sherlock said: “I would put it to you that you have failed in your task as a regulator. That the regulatory regime in this country was weak at best, very weak. Is your position now untenable?”

Mr Neary responded: “I would reject the suggestion that I would be acting in the interest of the banks.

“I am a public servant and I believe I always act in the public interest and I sincerely hope I enjoy everybody’s confidence.”

He said: “We do work very closely with the institutions we supervise. But there’s a difference between working closely with the banks and not being objective. I believe we have retained a sense of objectivity in the way we deal with all the various sectors,” he said.

Mr Neary said “the high level of lending over the past 10 years has to be considered in the context of what was happening in the economy.”

He said: “There was extreme demand in the economy for lending. Whether or not you describe it as willy nilly, I’m not sure if I agree with that, but there was a lot of it, there’s no doubt about that.”