Professor Eamonn Walsh:

It is difficult for me to know exactly what was reported to the regulator. We can imagine how the process might work, but we are speculating here. It might be the case that there is some sort of standardised Excel spreadsheet issued to every bank to be filled in and returned to the regulator. The main challenge with the design of such a spreadsheet is the captions that are used, for example, whether something is a retail loan or a speculative development loan. The captions used will colour the information that goes through.

The second issue is sectoral lending exposures or large exposures to individual lenders. One would anticipate that this would be reported up through the system. What could happen that would mean that it was not reported up? First, the guidance issued for filling in the spreadsheet might not be sufficiently detailed to make clear what must go into every box in the spreadsheet. Alternatively, the spreadsheet might not have had enough places to put in extremely risky lending.

There is a final consideration. I am not suggesting this occurred in Irish banking but we know from other jurisdictions, that one might structure information in such a way that it comes out in a certain way in reports. In other words, let us consider a big loan as a big chunk of salami and find a way to slice the salami so that it might not be apparent when looking at aggregate reports. Equally, one can think further back the food chain and if I was someone borrowing money from a bank, I might seek to structure a large loan in a way that might make it easier for the bank to slice salami later on. I am not suggesting that has occurred in an Irish setting but there are other cases, like BCCI, that are very informative if one looks at the auditing processes that went on in banks. It is an awful example of how information was making its way through the system.