Paul Coghlan (Fine Gael)

This is such a vast subject one would not know where to begin. I welcome both reports, which were referred to as scoping exercises. They were very useful and are a precursor to the commission of investigation, which we look forward to, and the terms of reference, as proposed in draft, to which the Minister has referred. I am glad to note they will come before the Houses and we will have a chance to have a debate on them here in due course.

What do we say about this issue? Banking went to blazes. There was a lack of regulatory control and a total breakdown in the system. A bonus culture drove the situation. Bank management were irresponsible. There was reckless lending and, in regard to a number of institutions, it almost looked like they had gone from prudential banking to allowing the cowboys take control, but more of that anon. That led to the over-reliance on construction and the property sector and as one report referred to, all the eggs were in one basket, which caused the explosion and led to the property bubble. Much of that was driven by the bonus culture in the banks, which was most unfortunate.

Professor Honohan, in his report, makes clear early on the failure of the role of the Central Bank and Financial Services Authority of Ireland in regard to banking practice and Government policy, which he said both clearly played a central role in contributing to the crisis.

At the top of their executive summary Messrs. Regling and Watson referred to the "imprint of global influences, yet it was in crucial ways "home-made". They went on to refer to the "fostered expectations of a continued rise in living standards and in asset values" as though it could never cease. They mentioned the other factors and deeper roots in relation to the "strong and pervasive preference in Irish society for property as an asset, and the fact that Ireland had never experienced a property crash". By God we have one now that will take us some years from which to recover. They further stated: "Fiscal policy, bank governance and financial supervision left the economy vulnerable to a deep crisis" and so on. They state that "external and domestic commentators were critical of fiscal policy", which was ignored, and the European Commission had warned in its own way also, which was overlooked or not given sufficient credence by our own people in power. In any event, the weakness of supervision contrasted sharply with the experience in other countries. It got out of hand, but the "official policies and bank governance failings" exacerbated our property crisis.

I hope that when the commission of investigation is set up we will learn more following from that. It is intended that it will complete its work within six months. That is very welcome, given the length of time it has taken to deal with some of the other matters of this country.

There are main players and peripheral players in this but I hope in the case of Irish Nationwide and Anglo Irish Bank we will hear more about the way those institutions failed and caused the problems but every banking institution in its own way was seriously at fault. There was no prudential banking. Banking had moved to something else.

Another subject that has been touched on in the debate is the question of the Department of Finance. As Senator Ross and perhaps others said — Senator Norris may have implied it also if he did not say it explicitly — there is a need for an examination of the question of interaction which has turned out to be a mysterious one in terms of the input the Department of Finance had into Central Bank reports. The strong suggestion is that this input was not helpful but the more serious point is that no one ever knew about it until now. That matter must be examined.

The Governor of the Central Bank, Professor Honohan, a welcome appointee who appears to be a breath of fresh air in that he is doing a very good job so far, is the first such appointment to break the tradition of a senior official of the Department of Finance being appointed Governor of the Central Bank.

I greatly welcome these scoping reports as a precursor to the terms of reference for the commission of investigation, to whose work we look forward.

On the comprehensive failure of bank management to maintain safe and sound banking practices, that comes back to the boards of the banks and the directors of all of those financial institutions who share a huge responsibility. They have been culpable. Some excellent public interest directors have been appointed by the Government, which is welcome. I hope with the increased equity in the systemic institutions — I refer mainly to AIB and Bank of Ireland — there will be more exemplary appointments which might be subject to Oireachtas scrutiny if it could be arranged, as has already been suggested by a previous speaker. However, we are seriously remiss in that directors and senior management remain in place in some of these institutions. I realise there is a total change in the nationalised institution and perhaps in one other but in the ones with the large branch network it is my understanding there are directors in place who were there at the sign-off of all of the reckless lending.

While I accept we had to save the systemic institutions, it is not responsible of us, considering so much taxpayers' money is at stake, to allow some of those responsible for reckless lending policies remain in place. Despite lending practices having been centralised and improved, the auditors who signed off on these banks' accounts are still in place. Is it intended to allow these auditors continue in place? Did the Minister of State say earlier there will be an opportunity in a further debate to discuss the draft terms of reference for the proposed commission of investigation into the banking crisis?