Bank directors aimed to avert panic
Union and business group representatives on the bank’s board admitted the semantic moves yesterday.
Speaking to the cross-party banking inquiry about the 2008 economic meltdown, former Ictu general secretary David Begg and Ibec director general John Dunne accepted problems occurred.
The duo, both Central Bank non-executive directors at the time of the crash, said the nuance occurred to ensure “consequences which were absolutely unintended” did not take place.
However, despite outgoing Central Bank governor Prof Patrick Honohan — appointed after the crash — telling the inquiry this nuance was unhelpful and ex-taoisigh Bertie Ahern and Brian Cowen saying they based their views on this and other advice, both the Ictu and Ibec officials insisted the report was still accurate as it included the correct information.
During two hours of questioning, Mr Dunne was asked by inquiry chair, Labour TD Ciarán Lynch, to explain the dilemma the Central Bank faced about inadvertently “triggering events which it was seeking to prevent”.
Responding to claims that the bank had an “if not explicit, an implicit editorial policy with how the financial stability report would present to the outside world” in order to not “scare the horses”, he replied: “There was real concern that if the issues were wrongly stated then you could have had consequences which were absolutely unintended. In retrospect, we should have erred on the side of in-caution or un-caution, rather than caution.”
Mr Dunne quickly added that the reports “were signed off on the basis that they contained the appropriate warnings about credit control and credit risk in a way that didn’t cause panic”.
“In retrospect, probably the nuances were seen as too important.”
Mr Begg said there “were a lot of pressures at the time, even from the political system” over the worsening situation: “I suppose, what the bank was trying to do was to manage the situation down into what would be hopefully a soft landing which, of course, might have happened had the international circumstances not arisen.”
Inquiry member and Socialist TD Joe Higgins earlier alleged the Central Bank “hid the truth, the real truth, for fear of spooking the markets”, a claim both witnesses rejected.
Both witnesses told Fine Gael TD John Paul Phelan they “still subscribe to the view” of a soft landing —which previous witnesses have admitted was based on no firm analysis.
The duo also confirmed they were given no specific financial training when joining the Central Bank board.
Mr Dunne defended light- touch regulation and said the level of financial regulatory staff — three in AIB and Bank of Ireland’s case — was appropriate. He took issue with the term “light-touch”, preferring “principled regulation” as the former phrase “diminishes” the work involved.
Mr Begg said he struggled to see any connection between the social partnership deals between government and unions and the 2008 crash, and told Labour senator Susan O Keeffe a social section of the troika should be set up in future to counter-balance what he feels is an “uncaring technocracy of neo-liberal zealots devoid of empathy”.
Mr Begg said the bank guarantee came “out of the blue”. However, Mr Dunne said he recalled an “exploratory” Central Bank meeting on September 16 when options were discussed.
