Banking Inquiry: ECB decision cost State €9.1bn
The Fianna Fáil governments of Bertie Ahern and Brian Cowen missed three key warnings which would have prevented or vastly reduced the scale of the Irish crash, the inquiry also found.
The embattled inquiry released its final report yesterday amid accusations from one of its own members, Pearse Doherty, that its weaknesses represented a “disservice” to the people.
Citing a previously unpublished National Treasury Management Agency (NTMA) report, the inquiry said the ECB’s decision not to allow either the late Brian Lenihan or Michael Noonan impose losses on senior bondholders cost €9.1bn.
Had we done so without agreement, Ireland’s access to emergency funding would have been stopped, the inquiry said.
The report was deeply critical of the ECB’s treatment of Ireland, saying it put the government under “undue pressure” to enter a bailout in November 2010. “The timing of the entry into the programme was determined by factors outside the Government’s control,” the report concludes.
It also found that the adoption of the soft-landing theory without any substantial testing “must be regarded as a key failing for the government, the Central Bank and the Department of Finance”.
It also concluded that both the Central Bank and the financial regulator had sufficient powers to intervene to prevent the bad lending practices in the banks, but both failed to act decisively.
Fine Gael senator Michael Darcy said that 29 developers were lent a total of €34bn, which he said was equivalent to the national debt in 2007.
There was also a culture of excessive executive pay in the banks, who moved away from prudent lending decisions, the report found.
The report detailed how the salaries of the six bank CEOs in 2007 totalled €14.2m, with Brian Goggin of Bank of Ireland receiving €3.9m in salary, bonus and benefits.
The committee also sought to end the “myth” of the night of the bank guarantee.
Chairman Ciarán Lynch said: “The night of the guarantee has become a thing of myth. The idea of a guarantee was not conceived on a single Monday night in September 2008; Department of Finance documents show that it was considered as part of a range of options as early as January 2008.
“Decision-makers, however, were forced to decide on a course of action in the absence of accurate information about the underlying health of financial institutions; no independent in-depth ‘deep dove’ investigating of the banks had been commissioned by the authorities by September 2008.”
But the limitations of the report were to the fore of questioning of committee members yesterday, several of whom voiced their frustrations as to what they were unable to do.
“It was deeply frustrating for us as members not to be able to delve into the Anglo story in far more detail and those who were in charge of the bank could not come before us. We were only scratching the surface,” Fianna Fáil’s Michael McGrath said.
Significant legal and procedural limitations precluded the inquiry from examining many key areas of the crash, but also prevented them from making hard-hitting findings of fact against any individuals.
As a result, two members of the inquiry — independent senator Sean Barrett and Socialist TD Joe Higgins — have already produced so-called minority reports with more robust findings and recommendations.
Mr Higgins, in his report, concluded that a “cabal” of senior politicians, bankers, bondholders and developers in place during the crash should have been jailed despite the fact “99.9%” of what they did was legal.
The refusal of the ECB to allow the burning of bondholders in 2010 amounted to “a one-sided extortion” of the Irish government, Mr Barrett found in his report.
The ECB abused its role to place “unduly stringent demands on Irish taxpayers” by refusing to allow the burning of bondholders, the independent senator said.
‘Cowen cleared’
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