Updated at 7.50pm
IRELAND’S LAWS TO deal with reckless behaviour from those in charge of failed financial firms need to be stronger, according to the head of the Central Bank.
But governor Patrick Honohan said it was mainly “unwise, rather than criminal” work from bankers that had lead up to the country’s banking crisis.
He was speaking at a Paris conference about some of the “mythical” commentary which surrounded the troika’s bailout programme for Ireland.
Honohan said it was a fact that the “unrestrained and reckless” behaviour of the banks destabilised the Irish economy and the state’s finances.
“With greater prudence by management and boards of the lending banks, this bubble could not have happened,” he said.
It is also worth emphasising that international lenders too were an essential part of the process: they were surely lucky to recover all of the funds they complacently advanced to fuel the boom.”
Conviction myth
However Honohan, whose institution is also responsible for regulating the financial sector, said it was a myth that no bankers were convicted over their actions before the crisis – although he acknowledged none had been sent to jail.
“But the Irish legislative framework deserves to be strengthened to take account of egregious recklessness in risk-taking by those who were in charge of failed financial firms,” he said.
Recently the UK enacted legislation of this type which I believe could be usefully mirrored in Ireland.”
Honohan also said it was a myth that the bank bailout caused the recession, or that it was primarily the bank guarantee that pulled the trigger on austerity.
“A glance at charts of output or employment confirms that the economy had already pretty much hit bottom by the time of the bailout,” he said.
The same charts also show that the Irish downturn – led by an exceptional construction crunch – was well under way by the time of the notorious bank guarantee.”
But he agreed the IMF had signed off on a bailout programme that risked creating unsustainable debt in the interest of stopping a spillover effect to other countries.
First published 1.34pm
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