Ivana Bacik (Independent)

I am very grateful to Senator Twomey for sharing time. As he has said, the reports show how warning bells should have been ringing a long time ago in the Irish financial services and banking sectors. These two reports, one by international experts and the other by the Governor of the Central Bank, lay the blame fairly and squarely on the Government and in particular on the Taoiseach, who was then Minister for Finance. It also lays the blame on the Central Bank and the Financial Regulator, whose total failure to supervise the banks and prevent a crash has led us to this crisis.

Earlier on the Order of Business there was some comment to the effect that the reports do not describe this crisis as home-made. However, right at the start of the Regling and Watson report, the first sentence says that while Ireland's banking crisis bears the clear imprint of global influences, it was in crucial ways home-made. The authors go on to point out clearly the very particular home-made features of the banking crisis, namely, weak bank governance and risk management and what they describe in memorable language as the "plain vanilla property bubble", adding that our "banking exuberance" indulged in few of the exotic constructs that caused problems elsewhere. They say this was a plain vanilla property bubble compounded by exceptional concentrations of lending for purposes related to property, notably commercial property.

To put it bluntly, the banks were simply lending too much. They were lending money they did not have. One does not need to be an international banking expert to realise that a check should have been put on the excesses of their banking exuberance at that point. Similarly, in Professor Honohan's report there is very clear reference to the domestic nature of the crisis. In paragraph 1.5, having discussed the difficulties in the global debt markets, he goes on to say that even before the failure of Lehman Brothers in September 2008, Irish residential property prices had been falling for more than 18 months, something that is, perhaps, overlooked now, and few observers expected that fall to end soon. In a much quoted passage, he goes on to say that it was conceivable that had international financial markets remained calm, the two main banks, AIB and Bank of Ireland, might have been able to manage their emerging loan loss problems without Government assistance by drawing on capital. It seems clear, however, that at that point Anglo Irish Bank and Irish Nationwide Building Society were well on the road to insolvency. In my view, that is an extremely critical finding.

The reports go on to discuss how the situation was allowed to emerge and stress the weakness of the Central Bank and the regulatory function. Looking at the finding in particular as regards the road to insolvency on which Anglo Irish and Irish Nationwide were well underway by the time of the collapse of Lehman Brothers, it is now very clear that the banking guarantee which we debated late into the night in this House was ill-advised, in the breadth of its scope in particular. The Labour Party was the only party to oppose it. We voted against it, as I did at the time as an Independent Senator. We were the only ones who did so, and I believe we have been proven right.