Simon Harris (Wicklow, Fine Gael) | Oireachtas source

I will be brief because I am eager to hear the views of Senators. I welcome this opportunity come before the Seanad to discuss the report of the Joint Committee of Inquiry into the Banking Crisis which was published last week. It is important to acknowledge the tremendous effort on the part of the committee. The significance of this undertaking cannot be underestimated. The hard work and commitment of the Deputies and Senators involved must be properly recognised. I would like to recognise the contribution of all members of the committee in regard to the large amount of work they carried out.

The banking inquiry was the first of its kind under the Houses of the Oireachtas (Inquiry, Privileges and Procedures) Act 2013. It is fair to say, therefore, that it was a learning experience for all involved and proved to be a challenging road. It is, therefore, admirable on the part of the committee and its support team, through their collective endeavours, that we are here today discussing the report’s findings and recommendations. I am sure we will learn from this process in terms of how we can improve the operation of this type of inquiry. Indeed, the second volume of the report deals with this specific issue and I am sure the Senators involved will share their experiences in this regard.

The main findings and recommendations of the inquiry are welcomed by the Government. Obviously it will be a matter for the next Government to consider and act on those recommendations. It is important at this stage to note on the record of the House the key findings in the report. They include the fact that no single decision or event led to the failure of the banks. Rather, it was the result of a cumulative series of events and decisions over a number of years.

There were in fact two crises rather than one, namely, a fiscal crisis and a banking crisis. The lending practices of the banks made them vulnerable to a liquidity risk which was not recognised. Banks had, by 2008, moved away from prudent lending principles towards a riskier asset value based lending model in their dealings with the property development sector. The business model of some key developers during the boom years led to them being overwhelmingly reliant on Irish financial institutions. The Central Bank and Financial Regulator had sufficient powers with which to do their job effectively and could have required banks to hold additional capital to absorb losses that could have arisen in the event of a financial crisis.

An independent review and assessment of the effectiveness of the Central Bank and Financial Services Authority, created in 2003, should have been carried out by Government, but it was the execution by the Central Bank and Financial Services Authority of their mandate and the absence of interventions that directly contributed to the crisis. The systemic risk that was building up in the banking sector was not identified by the Financial Regulator. The financial stability reports of the Central Bank, while monitoring the key risks to the financial system and financial stability, did not identify those key risks.

The Department of Finance relied too heavily on reports of the Central Bank and external agencies such as the IMF, the OECD and the European Commission. The soft landing theory accepted by the Department and external agencies was not substantiated by robust analysis or research. The Government at the time did not always follow the advice put forward by the Department of Finance or the Central Bank. In 2010, the ECB threatened the then Minister, Brian Lenihan, that it would not continue to provide emergency liquidity assistance, ELA, for the Irish banks if Ireland did not enter into a bailout programme.

Ireland’s entry into a bailout by October 2010 was inevitable, but the timing of the entry was determined by factors outside the Government’s control. The ECB’s position on imposing losses on senior bondholders in November 2010 and March 2011 contributed to the inappropriate placing of significant banking debts on Irish citizens. As a citizen, I found the manner in which the Houses of the Oireachtas and Irish people were treated by the ECB, in terms of its lack of appropriate interaction with the inquiry, disappointing. I am sure it was a source of great frustration and contrasts very sharply with how other international agencies and organisations co-operated with the inquiry. I do not think that is acceptable. It is something we should regret on a collective basis and it must not happen again.

I pay tribute to Senators D'Arcy, O'Keeffe, Barrett and MacSharry, who were members of the inquiry, and thank them for their collective bipartisan work. While there has been much commentary on the report, some of which we will hear today, it is important to say that, as a citizen, to see people come before the committee and testify in public for the first time and give their perspective and knowledge of the events that created one of the most unprecedented crises in the history of the State was powerful. It was something no other inquiry ever did. While it is fair to say that the report may not be earth-shattering, the fact that people came before the inquiry and testified in public and citizens had an opportunity to see decision-makers from a wide range of society testify has done the State significant service.

The committee operated in a bipartisan fashion when so many critics were eager to talk it down. It is regrettable that some of those who were loudest in criticising and talking about the report of the banking inquiry were those who refused to serve on the committee. I look forward to the debate and thank the Leas-Chathaoirleach.