Mr. Jonathan Sugarman:

I thank the committee for giving me this opportunity to finally put on record some of the factors which contributed to the Irish banking crisis and how I believe these can be avoided in the future. For those who do not know me, my name is Jonathan Sugarman. I was the risk manager for UniCredit Bank Ireland, a bank with a roughly €30 billion balance sheet, which was located in the Irish Financial Services Centre in Dublin 1. I joined the bank in May 2007. For those unfamiliar with the term risk manager, it is like a policeman who works within a bank on behalf of the banking regulator, which in this case was the Central Bank of Ireland. Effectively, I was there to look out for the people of Ireland. My job and that of all risk managers in all banks, regardless of where they are located, is to ensure the regulations regarding how a bank is run are adhered to and upheld. If they are not, it is my duty not just to my employer but also to the regulator to inform them of any activities which may not be within the limits of the regulations under which the bank operates. In 2007, the regulations under which I operated in UniCredit Bank Ireland were unambiguous and very clear as were the penalties for any infringement which might occur. In my case, failure to immediately notify the Central Bank of a breach of these regulations could result in a mandatory fine and-or five years in jail.

It is against this backdrop that I wish to talk to the committee today. I spent the first couple of months at the bank in 2007 familiarising myself with the systems, products and internal control mechanisms. Having previously worked for two German-owned banks in Dublin, I was well familiar with the risk management practices and the regulations which governed them. Approximately two months into my tenure at UniCredit, I began to notice anomalies which were irregular but which happened with a frequency that suggested to me that they urgently required further investigation. Within a very short space of time, it became commonplace for me to have daily meetings with the chief executive officer of the bank to discuss the ever increasing number of breaches of regulation that I was observing. I was told not to worry, that these were simply IT related glitches and that there was nothing for me to worry about. I thought this was somewhat unusual as being a risk manager I would personally suffer the full weight of the law if it were proved that I was aware of such breaches of regulations and did not report them to the Central Bank. Needless to say, as a new employee in a new bank, I went along with the instructions of my CEO for another week or two but there was no effort whatsoever being made to prevent or investigate the real cause of these glitches. It must be borne in mind that the relevant liquidity regulations came into force on 1 July 2007, which is two months after I started working at UniCredit, and I was only too well aware of the penalties for not complying.

I now refer the committee to item 6 which I have provided the committee with, which is the requirements for the management of liquidity risk that were issued by the Financial Regulator, as he was called then in 2006, to be enforced in 2007. I refer the committee to page 24 on item 6. It details the penalties applicable for any breach of regulations which took place after 1 July 2007. I will quote from Irish law. Section 58 of the Central Bank Act 1971 which refers to offences and punishments as amended by the substitution of section 9 of the Central Bank Act 1989 states that a holder of a banking licence who commits by act of omission a breach of a condition duly imposed and which relates to their licence "shall be guilty of an offence and shall be liable (i) on summary conviction, to a fine not exceeding £1,000 or, at the discretion of the court, to imprisonment for a term not exceeding 12 months, or to both, or (ii) on conviction on indictment, to a fine not exceeding £50,000 or, at the discretion of the court, to imprisonment for a term not exceeding 5 years, or to both". Further down the page, one can read, "if the contravention, breach or failure in respect of which he was convicted is continued after conviction, he shall be guilty of an offence on every day on which the contravention, breach or failure continues after conviction". That means that every single breach was a criminal act. Section 60 of the 1971 Act contains an extension of the offending provisions. It states "Where an offence under this Act is committed by a body corporate or by a person purporting to act on behalf of a body corporate or an unincorporated body of persons and is proved to have been so committed with the consent or approval of, or to have been facilitated by any wilful neglect on the part of, any director, manager, secretary, member of any committee of management or other controlling authority of such body or official of such body, such person shall also be guilty of the offence", which means not only am I guilty but my regulator is equally guilty once I have notified him.

There is no dispute of the fact that I reported a 20% liquidity breach to the Central Bank in the late summer of 2007. I urge the committee to understand the significance of such a breach. The following explanations should make it relatively easy to understand. Regulation states that a breach of 1% should send alarm bells ringing and red lights flashing. The Central Bank must be notified immediately. In the context of driving a car, this would mean there is a speed limit of 100 km/hr. Driving at 101 km/hr is a breach of law that has to be reported immediately to the authorities. UniCredit Bank Ireland only bothered to oblige the law and notify the regulator when we were speeding at 120 km/hr.

The immediate questions that should have been raised by the regulator as soon as I notified it of this breach should have been, "How on earth did you get to a 20% liquidity breach? Were you not aware when you exceeded 5% or 10%? Where were you when you hit 15%?" A breach of 20% implies that the bank came perilously short of liquid assets. The most liquid asset is cash. The events at UniCredit in the summer of 2007 occurred against the backdrop of the first bank run that Europe had seen since the Second World War. The entire branch network of Northern Rock in the United Kingdom had thousands of customers queuing at the door in fear that the bank was unable to return the cash that they had deposited with it. In the meantime, the management systems at UniCredit Bank Ireland were showing serious shortages of liquidity on a regular basis. As the members can see from the above section of the banking regulations, it would not only have been me as the risk manager who would have been liable for prosecution but also, the chief executive officer of UniCredit and, more importantly, and I cannot stress this highly enough, any other controlling authority, which in this case was and still is the Central Bank of Ireland.

What I find incredulous is that my life has been utterly destroyed simply because I did the right thing but the people who are jointly liable for the failure to adhere to the regulations, which this House formulated and passed into law, got off scot free. There were no sanctions whatsoever placed on UniCredit or more importantly, on the Central Bank of Ireland. I remind the committee that I have been unable to work for over ten years and I am totally unemployable as a result of my upholding the law of the Republic of Ireland.

Had the regulator done its job, it is my contention that the liabilities which were placed on the shoulders of the Irish nation, specifically the blanket guarantee which was given to all the Irish banks, overnight, which was effectively a blank cheque underwritten by every citizen in the State, would not have been necessary. This happened just a year after I resigned over the same issue of liquidity. A year after that, the country was saddled with a €64 billion debt incurred by the banks who violated the liquidity regulation, the same regulation that I had tried to warn the regulator about a year previously.

At the heart of this matter is the fact that neither the parent company in Italy nor the Italian central bank knew anything about this breach of regulation until 2010, some three years later, as can be observed in the video clip, provided to the members in item 14, in which Mario Draghi, President of the European Central Bank, recently states this unequivocally. The Central Bank of Ireland should have notified both of them immediately. It is now ten years later and Mr. Draghi has said he has never heard of this. He said that directly to Luke 'Ming' Flanagan, MEP, who is here today.

The question that must now be asked is: How is it that the Central Bank was remiss in carrying out its statutory function and nobody has ever been officially sanctioned because of it? My life was destroyed but the lives of those who work and worked in the Central Bank were not. The members of the committee must ask why and only they can ask why and get the answers.

In the recent banking inquiry with which this committee, and four members of this committee in particular, are more than familiar, another whistleblower emerged. The particular investigation in which they were involved was the regulatory stream. The banking inquiry whistleblower made it very clear to members of the Joint Committee of Inquiry into the Banking Crisis that they were of the opinion that the Central Bank of Ireland was being deliberately obstructive in regard to the investigation and it was alleged that the Central Bank withheld certain documentation. This was later corroborated by a former employee of the Central Bank of Ireland. I am aware that the banking inquiry whistleblower made several attempts to ensure that I would give evidence to the joint committee, but I fail to understand why my attendance was prohibited at that time. The members of the committee were aware of my case and I fail to understand why it has taken the committee this long to invite me in here today.

There are a number of threads of commonality which run through all the banking systems in this country and one of them is most certainly the delay between matters of potential or actual financial malfeasance being reported and the time it takes for official Ireland to admit that it just may have an Issue that must be dealt with. The harsh fact of the matter is that official Ireland has absolutely and completely destroyed the lives of every single whistleblower who has come forward regardless of from which organ of the State. It took Maurice McCabe ten years of battling against the State to finally begin repairing his life because the State made it as hard as possible for him and his family. The same goes for John Wilson and how he was treated. I should mention the Mary Boyle case and, more recently, the cover-up of the Grace scandal. The problem with this country is that official Ireland, those civil and public servants at the very top levels, the ones who have their hands on the levers of power, seem to be completely immune from any form of sanction, while those who do the right thing are vilified and their lives destroyed.

The reason there is such a row about getting people to pay for water, or about people lying on trolleys is that at the end of the day, the banks and their highly paid executives have always got to be paid and it will always be the poor people of Ireland who will suffer the most unless this House finally has the guts to do what is right. That is why I am in shock with respect to items I submitted, by 10 o'clock last Monday, for the members of the committee to see that I had to wait until an hour before the close of business yesterday to be told that I had to redact them.