Oireachtas Joint and Select Committees

Wednesday, 28 January 2015

Committee of Inquiry into the Banking Crisis

Context Phase

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I welcome Professor Kane and I hope he enjoys his stay in Ireland.

On page 9 of his presentation he states:

With each successive recession, more benefit is extracted by too-big-to-fail institutions. These patterns ought to be observable in the Irish scene as well. I fear that far greater and more-dangerous benefit flows will emerge in the next crisis.

Do we need to move towards a system where, rather than banks being too big to fail, they are small enough to fail? Professor Kane states, "Deeply insolvent banks are what I term zombie institutions. They can only operate because they are backed by the black magic of government implicit guarantees". Is our system at the moment too incentivised towards banks that are too big to fail? Is one solution to provide banks that are small enough to fail so that the black magic of the implicit government guarantee does not come into play?