Ivana Bacik (Independent)

I apologise to Senator Norris, who corrects me on that. However, very few of us at that time opposed the guarantee. Therefore it is extremely interesting to see now what Professor Honohan has to say about it. It is fair to say the Government has been spinning very hard paragraph 1.25 which finds it is hard to argue with a view that an extensive guarantee needed to be put in place. We all accept that small depositors needed to be protected, and to have confidence in the security of their deposits. However, the report says the extent of the cover provided can, even without the benefit of hindsight, be criticised in as much as it complicated and narrowed the eventual resolution options for the failing institutions and increased the State's potential share of the losses. Again, to put it bluntly, this meant we were on a road that led to NAMA. At paragraph 1.27 the report says it should have been clear at the time the open ended guarantee was provided that the two institutions were on the road to insolvency, and another key point, the wisdom of leaving senior management in place was not even considered.

There are quite a number of critical findings which emphasise that the fault for this crisis lies at a domestic level with the Government, the then Minister for Finance and the Regulator as well as the Central Bank.

I shall conclude on another interesting point, namely, that what we learn from this is the need to ensure there are adequate levels of regulation and that a greater degree of control is placed over the exuberance of bankers. Left to their own devices, clearly, they become particularly exuberant, but one of the features to emerge strongly from the reports is that in other countries the exuberance took different forms. Complex financial transactions were engaged in among the US investment banks and so on, but in the case of Ireland the banking exuberance manifested itself in what Regling and Watson termed a plain vanilla fashion, amounting to the simple excess of lending by the banks of money they did not have.

A key point about regulation, they say, is that it is important not to emphasise process over outcome. Process was emphasised. Complex regulations were adapted from the EU, but in the end all that was needed was clear regulation as regards the assets the banks should have retained when they were lending. It was not as complex a cause of crisis as in other countries. It was a very simple failure, in fact, yet devastating, as we all know to our cost.