Regulator’s report - We need simple rules, huge fines

THOUGH the Financial Regulator yesterday wrapped himself, metaphorically and partially, in sackcloth and ashes, it is difficult to overlook the impact that office’s failure has had on our society and economy.

Launching his office’s report for 2008, chairman Jim Farrell admitted that the watchdog “did too little, too late to cushion the blow of the global recession on Ireland”. The “too little, too late” part covered it all really, everything else was less than graceful. What the Irish Regulator could have done to control international affairs is as big a mystery as why it did so little to control the casinos masquerading as banks in this “Wild West” of European finance.

What a pity that the Regulator is still pointing fingers at things outside his control, especially as the courts reveal, almost on a daily basis, the kind of Klondyke grab-fest that had taken hold of Irish bankers right under the Regulator’s nose.

Already this week we’ve heard, in the case of a struggling property developer, of €245 million paid for 11.3 acres in Dublin. It was planned to build an office block and construction costs were estimated at €20m. The High Court heard, on Monday, that this project – if completed – might be worth less than €10m.

Sadly, this is not by any means an isolated case and this kind of collapse is likely to become an all too familiar theme in our courts. In this context, it is difficult to expect anyone facing the consequences of the McCarthy report, or coming to terms with having lost their job, to imagine that there was any regulation at all.

As the dust begins to settle on these scandals, it is apparent that our difficulties are cultural as much as regulatory. We have no tradition, or expectation, of powerful, independent regulators confronting institutions loosely known as the establishment. We do not have the confidence in our civic institutions to empower them with the authority to protect the common interest.

Only yesterday we had an example of this failure when the State representative on the board of Anglo Irish Bank, Alan Dukes, felt obliged to criticise corporate watchdog Paul Appleby over the length of time his inquiry into Anglo Irish Bank is taking.

There has been a lot of fine talk about what needs to be done to control financial institutions to try to ensure that we do not allow the fraud of recent years to be repeated. But do these measures have to be complicated?

Surely an independent watchdog with the power to act on its conclusions with or without the approval of politicians is part of the answer. Another part would be penalties so crushing as to make it far too great a risk for any banker to behave as our well-groomed privateers did. Multi-million euro fines for the banks plus devastating invasion of the bankers’ private resources as well the possibility of being amongst the first guests at Thornton Hall would, at a guess, do the job nicely.

In the coming months there will be a lot of pulling and dragging over the McCarthy report. It is inevitable that a majority of the suggestions will be implemented. It might make it more bearable if regulations with the capacity to impoverish white-collar criminals were in place long before even the slightest McCarthy cut is imposed. Take what they cherish most – their wealth.