Nevertheless, it would be foolish to imagine they are anything more than the very first steps towards a long and challenging remaking of how business is conducted in this country. An essential remaking that will ensure that business understands and observes responsibilities beyond those owed to shareholders; a remaking that must restore social responsibility to commercial life, especially banking.
The first of these was when National Asset Management Agency (NAMA) chief executive Brendan McDonagh and Financial Regulator Matthew Elderfield briefed Oireachtas committees. Both were frank and impressive. They seemed to represent a determination and tenacity so long absent — or tacitly discouraged by senior politicians — in financial regulation.
Their work is so important on so many levels. They have huge responsibilities in financial terms but they have another responsibility just as important. They must be part of the vanguard that leads the fundamental changes needed in business culture. By their work they have to show the world that the wild west of European finance has been tamed and is now a safe place to invest and do business.
Though most of us have reached the point where we’d prefer to look to the future rather than contemplate the sins of the past Mr McDonagh’s declaration that NAMA would start foreclosing on bankrupt developers in a number of months brings the kind of edge to affairs that might have curbed the lunacies of the past had it been in place. His assertion that borrowers who used property as collateral but transferred it to others to try to secure it would be sued is equally welcome. This seems to be just the kind of reasonable disincentive that by its absence allowed once moderate developers become a huge liability to us all.
Thursday’s capitulation by Quinn Insurance, when it welcomed the appointment of permanent administrators, was an unexpected indication of how real regulation can be a game changer. Just last Monday, Quinn presented the High Court with a comprehensive affidavit to try to stave off the indignity of administration. Earlier Seán Quinn said the bid was “the biggest mistake in Irish corporate history”.
Maybe it was Mr Elderfield’s threat to make damaging disclosures unless Quinn co-operated that changed minds but it does show what can be achieved by a confident, determined and well supported regulator.
Yesterday’s announcement by Bank of Ireland that it had to sell parts of its business, regretfully, according to bank boss Richie Boucher, is another indication of how things might be changing.
The bank, because it would not exist without State aid, is obliged under EU rules to shed interests to avoid the possibility of unfair competition. This will be a bitter pill for the bank to swallow but it is a direct consequence of what Mr McDonagh described as “reckless abandonment of basic credit risk and prudent lending”.
Light-touch regulation destroyed this country and unless we impose regulation those who exploited our naivety will do so again. In this context this has been a good week, hopefully the first of many.