Oireachtas Joint and Select Committees
Wednesday, 25 February 2015
Committee of Inquiry into the Banking Crisis
Context Phase
Professor Eamonn Walsh:
The basic problem is with the accounting rules. The accounting rules say a bank goes out and lends money to a customer and it earns interest from that customer. In Ireland between 2002 and 2007 banks expanded their loan books very dramatically. In the early years of issuing a loan to somebody, in general one would expect that nothing is likely to go wrong with that loan, so early in the boom when everything is going up there is very little objective evidence that anything might be going wrong with these loans.
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