Rogue bankers should be jailed, says Honohan

FINANCIERS who flouted the law during the banking collapse should face jail terms, Ireland’s top banker has insisted.

However, Central Bank governor Dr Patrick Honohan warned the complexities of the crimes involved could make it difficult to secure convictions.

“People who have committed criminal acts in relation to this thing should go to jail for sure. You don’t to go jail for making mistakes, but you should go to jail for criminal acts,” he said.

Dr Honohan would not be drawn on specific cases, but opposition politicians have expressed concern that no one has been brought to book over the way scandal-rocked Anglo Irish Bank was operating despite an ongoing Garda investigation lasting more than a year.

Mr Honohan’s intervention came as the banking system plunged into fresh turmoil after the Government was forced to take a one sixth stake in Bank of Ireland after the EU blocked a cash transfer – sending shares sliding again.

The bank governor also moved to play down concern at the taxpayer having to take a 15.7% stake in Bank of Ireland instead of the institution paying the state back the first €250 million installment on the €3.5 billion used to bail it out. The Central Bank governor described the stock buy-up as an “untidyness” in the “choreography” of restructuring the country’s banking system but dismissed the sudden dive in the bank’s shares as nothing out of the ordinary.

Addressing the British Irish Parliamentary Assembly in Co Cavan, he also underlined the fact that more capital injections into Bank of Ireland and AIB would be needed once NAMA is up and running and called for people to be “measured” in their expectations of what NAMA could achieve.

Fine Gael finance spokesman Richard Bruton said the Government’s banking policy was “in tatters”.

Finance Minister Brian Lenihan admitted the stock option was not the Government’s first choice, but it still made sense: “We arranged, if they weren’t in a position to pay cash, we would get shares of equivalent value.”

The bank governor also insisted reducing nominal wage rates was key to boosting the economy. “Though tough, this should be somewhat less painful than might appear at first sight, given the fact that inflation in Ireland has been negative for well over a year – quite a contrast with the UK, where inflation currently exceeds the official target.”

Bank of Ireland shares fell more than 6% after the Government stocks move.

In return for taxpayers’ €3.5bn investment, Bank of Ireland was to pay an annual dividend of 8%, but the EU blocked banks in receipt of state aid from making such payments because they would amount to a direct transfer of money from the state to private investors.

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