Irish lawmakers will seek to set up an inquiry into the collapse of the nation’s banking system in the wake of a criminal trial in which a judge criticized the nation’s former top regulators.
The country’s coalition government will seek to bring a motion to set up a parliamentary inquiry into the crisis next week, according to an e-mailed statement today. Ciaran Lynch, a member of Parliament for the Labour Party, will head the panel, according to the statement.
Ireland is still recovering from its banking crisis, which was triggered in 2008 by the collapse of a decade-long property boom. Taxpayers rescued the banks at a cost of 64 billion euros ($88.7 billion), which later prompted an international bailout for the country and years of austerity budgets.
“The people of Ireland want an open, transparent, accountable inquiry into the events that have so damaged their lives and the economic prospects of our country for the last number of years,” Minister for Public Expenditure Brendan Howlin said in an interview with RTE Radio today. “What’s at issue here is answering fundamental questions.”
Lawmakers have yet to establish the inquiry’s parameters, Howlin said in the interview. There are “clear issues” that need to be addressed about the regulation of the country’s banks, Howlin said, citing the recent criminal trial of Anglo Irish Bank Corp. executives.
Judge Martin Nolan yesterday spared two former top Anglo Irish executives prison sentences for their role in a 2008 loans-for-shares deal. Pat Whelan and Willie McAteer face community service after a jury found them guilty of authorizing loans to wealthy clients to buy the bank’s shares, the judge said.
Regulators, who were aware of the bank’s plans to lend to buy shares, should have warned Anglo Irish about the deal, Judge Nolan said. It was “incredible that red lights didn’t go off,” he told the court.
Whelan and McAteer authorized 450 million euros of loans to 10 wealthy clients for the deal, which the judge described as a “misguided attempt to save the bank.” They were cleared of six other charges.
“I must say that the attitude and the behavior of the regulator certainly has complicated the issue in sentencing,” Nolan said. A state agency had led the executives “into error and illegality,” he said.
Anglo Irish was nationalized months after the deal to prevent its collapse. The rescue cost taxpayers 29.3 billion euros.
Patrick Honohan, governor of the Central Bank of Ireland, today described the failings of the regulators laid bare by the trial as “sorry story.”
“This is something that’s behind us, but of course the financial crisis is not behind us,” Honohan told reporters today. “It has a long period of consequence.”
The bank executives had sought to unwind a stake controlled by Sean Quinn, Ireland’s then-richest man. McAteer and Whelan helped organized loans to clients to buy the stake and stop it cascading onto the market.
During the trial, Con Horan, Ireland’s former head of prudential regulation, said the agency “engaged actively” as the bank sought to lift the threat posed by the Quinn holding.
Regulators were concerned that a disorderly unwinding of the Quinn holdings could damage the Irish banking system and encouraged Anglo Irish executives to find a solution, Horan told the court. Still, he was unaware that the bank was financing the deal itself with long-term loans, he said, rejecting a suggestion that he acted as a “cheerleader” for the deal.