The authors of one of the reports into the source of the Irish banking crisis have told an Oireachtas committee that no one individual or institution is to blame and that international factors must be taken into accountT
Klaus Regling told the Committee that it would be easy to blame one or two people, or institutions, for the banking crisis but said that analysis would be too simple. He said international factors must also be taken into account when outlining the reasons for the crisis.
Max Watson, the co-author of the report on the banking crisis, said the international environment included bad and dangerous banking practices, which were missed by supervisors. Where regulation existed, banks attempted to get around it, he said.
Mr Watson said that by 2006 it was no longer possible to envisage a soft landing for the Irish economy. He also pointed to governance failings and said people were taking a risk on the boom.
He said that what happened was not a 'one-bank problem' and that senior policy makers lacked information on the banks.
Klaus Regling said it was not part of their remit to scrutinise the internal Department of Finance policy formation, but said the overall fiscal policy was not sufficiently counter-cyclical and that tax expenditure got out of control.
He also said there was not much in the way of good advice being given to policy makers.
Max Watson said that the separation of regulation from the Central Bank did not work in Ireland. Quoting examples of good regulation, as in Croatia, Mr Watson said that such regulators just 'toughed it out' with 'robust supervision'.
Mr Watson said it was clear that there was a culture of 'not rocking the boat' and he added that the Central Bank should have known about the exposure of banks to commercial property.
He said that Ireland needs more economic analysis resources, particularly in the Central Bank and the Department of Finance. There was also a need to strengthen fiscal policy-making, by employing a council of outside experts to advise on budgets.
Max Watson also said that one Irish bank was unaware of bad governance practices and this proved lethal. In another Irish bank there was knowledge of bad governance practices, but this was not pursued.
Klaus Regling said there was a need in future for macro-economic assessments of risks and a capacity to carry out such assessments should be added to the the Department of Finance, the Central Bank and the Financial Regulator. Such capacity was missing in the past, he stated.
It would also be good, he said, to include non-national experts in the national administration.
Both Mr Regling and Mr Watson said that the Commission of Enquiry into the banking crisis would probably need to be held partly in private, to deal with confidential information.
Klaus Regling told the committee toady that Ireland is not ruined as a result of the banking crisis. He said he belived the crisis management in the country since the event has been better than in other European countries. He added that with the right policies there are good prospects for good growth.
He said Ireland still has a higher per capita income than the EU average.
