John Paul Phelan (Carlow-Kilkenny, Fine Gael) | Oireachtas source

I thank my fellow members of the banking inquiry, the inquiry Chairman and its staff, including the external staff who were brought in to participate in the investigation. The past 19 or 20 months have been interesting to say the least. At times, it appeared a report would not be produced and the inquiry would not complete its work. Thankfully, the report was published yesterday and I salute everyone involved in that endeavour. The experience was among the most interesting periods in my 14 years in the Oireachtas.

One of the questions members of the banking inquiry were asked yesterday was whether a follow-up report would be necessary. I do not know if that is the case but if I am in a position to do so, I will not immediately volunteer to take part.

Having been involved in many Oireachtas committees, I was struck by the remarkable absence of party politics from the proceedings of the banking inquiry. While there was much in the way of politics because virtually everything in life is political at some level, party politics were largely absent from the public hearings of the inquiry. In that respect, I regret that my colleagues, Deputies Joe Higgins and Pearse Doherty, were not in a position to sign the inquiry's report. Nevertheless, I understand most of their reasoning for not doing so.

Deputy Pearse Doherty raised a point regarding evidence that was given by certain witnesses. One of the binding and extremely frustrating circumstances in which members of the committee found themselves was that where four or five people gave an opinion of a particular event and one of them differed from the others, the inquiry did not have the power to adjudicate on who was right or wrong. Members may have had personal views on the matter. For this reason, I do not understand the argument made by Deputy Doherty as he will have known from the outset, as all members did, that the inquiry did not have the power to adjudicate in such circumstances. I regret the more political tone in the Deputy's contribution. It was a shame because he contributed as much, if not more, than many of the other 11 members, particularly in the inquiry's private meetings. I suspect there were other political matters at play in his decision not to sign the report.

Previous speakers addressed the major causes of the economic crash. The Chairman of the banking inquiry, Deputy Ciarán Lynch, spoke about the fiscal and banking crashes and noted that the two were interlinked. The fiscal aspect of the crash is often overlooked and, as Deputy Lynch noted, the State became completely dependent on transient, temporary construction taxes for funding. This was the fundamental reason for the large increase in the national debt and the burden imposed on people for the past seven or eight years.

Many people, particularly in institutions that provided witnesses to the inquiry, promoted the theory of a soft landing for the economy. However, none of the witnesses was able to present to the inquiry an example of a soft landing occurring anywhere else in the world. Despite this, many people believed Ireland would be an exception and experience a soft landing. Sadly, the opposite was the case.

It is clear from the hearings of the banking committee that the boards and senior management of the financial institutions bore fundamental responsibility for the bank collapse. They failed miserably in their primary responsibility to their shareholders who have been largely ignored in public comment. Many people who had shares in banks were not well off but individuals who had put away a few bob for their retirement. In many cases, their investment was completely wiped out. We all meet people whose future was thrown into turmoil as a result of the collapse in bank share prices. The boards and senior management of the banks bear full responsibility for this.

On the external audit function, all of representatives of the external audit companies that appeared before the inquiry flagged the fact that their companies reported in accordance with the audit rules in place at the time. They argued that the rules needed to be changed. It remains the case, however, that all of the external audits, with the exception of one or two minor notes issued in the years immediately before the crisis, failed to flag any potential bubble, particularly in the commercial lending sector.

On the matter of regulation, we managed to create a unique Irish solution to regulation, whereby we removed responsibility for regulation from the Central Bank and vested it in the Financial Regulator. From the evidence provided by witnesses from both organisations, they appear to have been somewhat confused at times as to what their specific respective roles were with regard to regulation. It became clear - in fairness to Deputy Pearse Doherty, his questions to the former Governor of the Central Bank elucidated this issue - that responsibility for maintaining overall financial stability came within the remit of the Central Bank, which failed to use its powers in this regard.

It also became clear from the evidence of Mr. Bertie Ahern and Mr. Brian Cowen that they placed complete and absolute trust in the Financial Regulator in terms of how the process of regulation worked. To find out that three people were responsible for the regulation of two of the biggest financial institutions in the country beggars belief. In their evidence to the inquiry, Mr. Ahern and Mr. Cowen seemed to be as surprised by developments as everyone else, yet they were in charge of the Office of the Taoiseach and Department of Finance, respectively, when the so-called regulation was in place.

Light touch regulation is the term often used to describe the system of regulation that operated in Ireland at the time. Regulation seemed to be non-existent rather than light touch at times. There was also an inherent contradiction in the legislation that established the Financial Regulator in that as well as having the responsibility to regulate, the Regulator was also given a designated responsibility to promote financial services in Ireland throughout the rest of the world. While the legislation has been amended in this regard, this was an inherent contradiction. The then Taoiseach, Bertie Ahern, referred in his evidence to an address he gave to a conference at which he was promoting Ireland as a country with light touch regulation and a location in which financial institutions should invest.

Previous speakers referred to the role of the European Central Bank, ECB. Representatives of the ECB should have appeared as witnesses before the banking inquiry and the bank did not proffer any proper reason for not doing so. The failure of witnesses from the ECB to appear definitely curtailed the inquiry's ability to carry out its task fully because the ECB was a key player in the events surrounding the banking collapse in Ireland and further afield.

I will briefly address four or five new issues that were uncovered by the banking inquiry.

The first is the Big Bang myth of the guarantee, in other words, the view that somehow the guarantee appeared out of nowhere in September 2008 and that there was no other option. That was said many times in debates in this House and the other House. I remember getting my half-hour slot at 5.30 a.m. in the Seanad to speak on the legislation following the guarantee. I said that it made me sick to my stomach but that on the basis of the evidence given by the Minister and the officials I had to support it, although I opposed it personally.

I was struck afterwards by one thing and I was reminded of it yesterday at the press conference. I was very good friends with the late Brian Lenihan, a man who I admired very much. He came up to me after the debate finished at 8 a.m. and said that he completely agreed with everything I said. That was partly his manner, in the sense that he was a barrister and he could see every side of each argument. However, it left me wondering something at the back of my head when Professor Honohan said during one of his first visits to the inquiry that he believed Brian Cowen had over-ruled Brian Lenihan. I wondered whether that had been Brian Lenihan trying to tell me that he was in fact on my side of the argument and that he had doubts. I wondered whether that was it or whether that was simply the way he conversed with people. He was a man who probably had not slept for days at that stage and I can remember him being very tired. Obviously, he was ill as well. It is a pity for us that he was not before the inquiry, but more is the pity for his family and friends that he is not around anymore. The guarantee was first talked about up to ten months before the guarantee night. That was news.

The fact that representatives from the National Treasury Management Agency were physically present in the building and yet not present in the room where a decision was made to put a potential liability of €400 million on the backs of Irish taxpayers beggars belief. None of the people in the room gave us any clear reason why that was the case.

Some of the representatives of the banks present on the night obviously had worries about the future sustainability of the institutions. The Bank of Ireland minutes that followed the inquiry show that they were talking about a possible taxpayer injection only weeks after the guarantee.

The fact that the International Monetary Fund went as far as to bring Lee Buchheit, the international expert on debt restructuring, to Ireland to consider the option of burning senior bondholders was not known before the inquiry began its hearings. On the whole, the inquiry, while flawed in its process and limited in what its members could do, has elucidated many new matters that Irish people did not know before the hearings took place.

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