Hurley admits more could have been done to stop banking crisis

CENTRAL Bank governor John Hurley staunchly defended his office’s recent record when grilled by a Dáil Committee yesterday.

Wed, 11 Mar, 2009 - 00:00

However, he conceded more could have been done on the regulation front to aid financial stability in the Irish banking system.

Mr Hurley said that the Central Bank’s various Financial Stability reports have not proven as effective as they may have done and “didn’t change the behaviour of the banks in the way they should have”.

In that regard, he said that “appropriate levers” should be put in place to ensure that action is taken if risks warned of in Central Bank reports aren’t heeded.

Significant change in the financial services sector regulation is necessary here, he said.

However, when questioned by the committee with regard to the specific roles of both the Central Bank and the Financial Regulator, Mr Hurley said that any failure in financial supervision didn’t cause the economic crisis here but may have aggravated it.

He added that the first the Central Bank knew of the controversial €7 billion deposits by Irish Life & Permanent in Anglo Irish Bank, in order to shore up the latter’s balance sheet ahead of its end-of-year audit, was via the recent PricewaterhouseCoopers report.

When asked by Fine Gael deputy Kieran O’Donnell whether the banks would require more financing from Government, Mr Hurley said that the individual €3.5bn packages being given to AIB and Bank of Ireland “should be sufficient”.

However, he added that the real answer to that question depended on “the length and depth of the recession” as he pointed out that the €3.5bn was already higher than the initial planned amounts, when the Government’s recapitalisation plan was originally announced.

As well as supporting the Taoiseach’s recent call for a joining of the Central Bank and the Financial Regulator into a single body, Mr Hurley rejected a line from Deputy Sean Ardagh that he was “derelict” in his duty in relation to the “prudential supervision of the banks”.