Banking Inquiry did not have sufficient powers - Phelan

One of the binding and extremely frustrating circumstances in which members of the Banking Inquiry Committee found themselves was that where four or five people gave an opinion of a particular event and one of them differed from the others, the Inquiry did not have the power to adjudicate on who was right or wrong, Fine Gael Deputy John Paul Phelan told the Dáil.

“Previous speakers addressed the major causes of the economic crash,” he said. “The Chairman of the Banking Inquiry, Deputy Ciarán Lynch, spoke about the fiscal and banking crashes and noted that the two were interlinked. The fiscal aspect of the crash is often overlooked and, as Deputy Lynch noted, the State became completely dependent on transient, temporary construction taxes for funding. This was the fundamental reason for the large increase in the national debt and the burden imposed on people for the past seven or eight years.”

Many people, particularly in institutions that provided witnesses to the inquiry, promoted the theory of a soft landing for the economy, he said. However, none of the witnesses was able to present to the Inquiry an example of a soft landing occurring anywhere else in the world. Despite this, many people believed Ireland would be an exception and experience a soft landing. Sadly, the opposite was the case.

“It is clear from the hearings of the Banking Committee that the boards and senior management of the financial institutions bore fundamental responsibility for the bank collapse,” he said. “They failed miserably in their primary responsibility to their shareholders who have been largely ignored in public comment. Many people who had shares in banks were not well off but individuals who had put away a few bob for their retirement. In many cases, their investment was completely wiped out. We all meet people whose future was thrown into turmoil as a result of the collapse in bank share prices. The boards and senior management of the banks bear full responsibility for this.”

On the external audit function, all of representatives of the external audit companies that appeared before the inquiry flagged the fact that their companies reported in accordance with the audit rules in place at the time, he said. They argued that the rules needed to be changed. “It remains the case, however, that all of the external audits, with the exception of one or two minor notes issued in the years immediately before the crisis, failed to flag any potential bubble, particularly in the commercial lending sector,” he added.