Professor Patrick Honohan:

This is a point about the Governor and the Central Bank narrowly thought of, as distinct from the Financial Regulator in whom most of the regulatory powers are vested. It is important that people are clear on that.

The legal opinion is that there are two particular legislative provisions that are very relevant here and give the Governor power to step into a situation which should be managed by the Financial Regulator. When I refer to the Financial Regulator, I am not talking about one person but a whole section of the Central Bank and Financial Services Authority of the time. Section 23 of the Central Bank Act 1971 is a very old provision. In fact, I think it is a slightly modified version of the provision in the 1942 Act. It is a general power to require banks or a particular bank to maintain specific ratios. However, as it does not say what these ratios are, it means any ratios in principle. This is a very wide and old-fashioned type of power, which effectively says, "We trust you to establish ratios which are for the safe conduct of banking". These powers are embodied in the Central Bank board and delegated to the Governor. They are, therefore, wide but general types of powers. That is one thing he could have used. He could have said, "Look, the situation is very bad and I am going to appeal to the 1971 Act, intervene and require the banks to have a ration of not more than 20% of their assets in this type of-----