Charlie McConalogue (Donegal North East, Fianna Fail) | Oireachtas source

I commend the many members of the committee on the tremendous effort, commitment and time they had to dedicate to this over the past 18 months. We all know the onerous work responsibilities that are put on us as Deputies and Senators and for the members of the committee to give the time required to hold the hearings and compile the report afterwards is to their great credit. They have done the State some service. Their commitment was not in their own interests in the run-up to a general election as it took them away from other commitments, though that is ultimately what is required for the Oireachtas committee system to operate effectively. I commend the Chairman, Deputy Ciarán Lynch, on his work and my own party's two representatives, Deputy Michael McGrath and Senator Marc MacSharry, who worked very well with the other committee members. The hearings and proceedings were conducted in a non-partisan manner despite the fact that the Government, at the outset, insisted on having a majority. The membership of the committee operated in a way that remained focused on the task in hand and did not let party politics intervene.

The ability of the committee to make findings and apportion direct responsibility to actors in the run-up to the banking crisis was very limited because of the legislation under which they had to operate.

Also, it was unfortunate that it was unable to hear from all the witnesses it had invited. I refer in particular to some of the witnesses who were invited to give evidence relating to Anglo Irish Bank. An investigation that did not hear from them was hampered by that, particularly the lack of evidence from Seán FitzPatrick and David Drumm with regard to the very significant role Anglo Irish Bank played, which will ultimately cost the State up to €30 billion.

Overall, the committee and the report perform a vital function. Although the committee could not make many findings of responsibility, many of the key participants in the crash of the banking sector appeared before it to account for their actions and to explain as best they could how it came about. It will allow the public to make up its mind about how things happened. Unfortunately, the inquiry was established much later in this Dáil's term than was required. That this is quite possibly the last full sitting day of the current Dáil and that the report has only been published this week, with only a short window of time for the debate on it this evening, reflect the fact that the inquiry was set up too late and went down to the wire. Also, at the outset, there was a clear political motive on the part of the Government in establishing the inquiry, as was reflected by the Taoiseach's statement in advance of its commencement in which he alleged there was an axis of collusion in which Fianna Fáil and the previous Government were involved. That certainly was not the spirit with which the inquiry should have been established, and the Taoiseach did not serve it well in that regard.

The hearings and the participation of so many people in the inquiry allowed the public to put in context how the banking inquiry came about and to form their own opinions on the dynamics that led to it. The fact that the Taoiseach was willing to go to the country last November, although he changed his mind, showed that the completion of the banking inquiry was not necessarily a top priority, given that it was still ongoing. However, I welcome that the Dáil term was extended to allow the inquiry to complete its business.

The key findings demonstrate that there was poor regulation. That played a key role in the downfall of our banking sector. The banking inquiry found that the Financial Regulator and the Central Bank had the required powers to intervene in the sector to protect the financial stability of the banks but, despite having those powers, failed to intervene and carry out their roles effectively. From 2000 to 2008, no enforcement measures were taken by the Financial Regulator against any of the banks for breaches of rules that had been identified during that period. The Financial Regulator was also found to have failed to identify some of the key systemic risks that had been building up in the banking sector, despite its being part of the Financial Regulator's remit. In addition, there were no consequences for any of the banks that breached sectoral lending limits. That failure to enforce the law and ensure there were penalties for banks led to a situation in which the Financial Regulator was seen not to have the teeth it had been allocated in the first place. It allowed things to get out of hand.

With regard to the banks' practices, the inquiry has shown that the banks' lending was far from prudent and, indeed, was reckless. The practices with regard to lending to property developers, and in many cases entering joint ventures with them, played a large part in the subsequent downfall of the sector. Traditionally the banks were funded by customer deposits, but during the property boom they became over-reliant on wholesale financial markets for their funding. This meant that when borrowing on a short-term basis became exceptionally expensive their viability was totally undermined.

As regards the Government and the performance of State institutions, the inquiry found that too many subscribed to the idea of a soft landing. That consensus and the failure to listen to strong dissenting voices, albeit voices that were very much a minority, is a lesson we must learn from to ensure the same thing is not repeated. The State's finances, unfortunately, were vulnerable because of an over-reliance on a pro-cyclical economic cycle. The report also finds that all political parties advocated pro-cyclical policies and demanded reductions in taxes and increases in expenditure, despite the fact that they were based on short-term income and what subsequently proved to be short-term revenue.

The report finds that the idea of a bank guarantee was considered well in advance of the week in which it was implemented. Indeed, it is indicated that there were documents dating back to January 2008 discussing the merits and potential for a bank guarantee, if required. The report is also particularly critical of the fact that there was no proper record keeping in the Department of the Taoiseach of the discussions that took place on the night the guarantee was implemented. The Government was advised by both the Central Bank and the Financial Regulator that as far as they were concerned, all of the banks were solvent on the night of the guarantee. That is made clear in the report. The ECB, through its then president Jean-Claude Trichet, made it clear that no bank could be allowed to fail. That was a key consideration in the Government's decision to proceed with the option of the bank guarantee. With regard to the troika programme, the same president, Jean-Claude Trichet, threatened to cut off essential emergency liquidity assistance support for Irish banks, leaving the Government with little choice but to pursue the guarantee option. The report also finds that the European Central Bank position on burden sharing in both November 2010 and March 2011 was a key element in contributing to the placement of the banks' debts on Irish people.

Overall, the report is positive, in that the inquiry has managed to complete its business. I thank the members who were so crucial to carrying out its work.

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