Klaus Regling, German economist and co-author of an upcoming report into the banking crisis yesterday told the Finance Committee that the reason the banking sector in Asia survived the financial crisis better than Ireland and all western economies is that their financial regulators responded to changes in the marketplace by introducing restrictions to control unsustainable lending practices by banks (to prevent a property bubble) in addition to the Financial regulatory preventing banks from undertaking off balance sheet transactions.
Furthermore he said that Asian Banks unlike their Irish or European equivalents largely did not invest in or buy products that they didn’t understand thereby reducing their exposure to risk and financial loss.
Former International Monetary Fund (IMF) Deputy Director Max Watson will collaborate with Klaus Regling in investigating the banking crisis and will submit a report to the Minister for Finance.
Their report will be considered with a review by the Governor of the Central Bank in forming the basis for a Commission of Investigation.
It will be interesting to see if Mr Regling will lay any blame on the Financial Regulator or the former Minister for Finance, Brian Cowen T.D. for not ensuring proper public sector governance of the Financial Regulator, the Central bank or the banking industry in Ireland.
The chief executive of the financial regulator, Pat Neary took early retirement over the handling of the regulator’s investigation into the €87 million in secret (off balance sheet) directors’ loans at Anglo Irish Bank.
The Financial Regulator was warned by the German regulator, Bafin, as early as 2004 that Sachsen LB's troubled Irish subsidiaries were involved in highly risky and under-scrutinised transactions worth as much as €30bn or 20 times the parent bank's capitalisation. Despite the warning, in 2007 the Regulator approved another Sachsen investment vehicle and two months later the stable of off-balance sheet companies needed a €17.3bn bail-out from the German association of savings banks to keep Sachsen afloat.
In August 2009 the head of the German Financial Regulator told the Reichstag Finance Committee that the failure of the Depfa Bank, which was completely supervised by the Irish Financial Regulator, lead to the collapse of its German parent which forced Berlin to bail it out at a cost of €102 billion.
In December last year the Governor of the Irish Central Bank, Patrick Honohan, said that “ignorance and inattention” were at the heart of regulatory failure in Ireland.
Overall responsibility should lie with the previous government, the Toiseach Mr. Bertie Ahern T.D., the then Minister for Finance Mr. Brian Cowen T.D., and the collective Cabinet.
As for accountability for the person in charge of the Financial Regulator Mr. Leary, the man who oversaw the culture of “ignorance and inattention” well he took early retirement and received a lump sum of €390,000 and an annual pension of €130,000 as part of his retirement package.
Fianna Fail the party of government, the political party that oversaw this mismanagement, ineptitude, incompetence of government at best and criminal behavior at worst meanwhile remain in government and we are supposed to trust them to get us out of this mess.
No accountability, no transparency, no chance of those responsible for regulation and public sector management ever being held to task for not doing their job.
Sounds all to familiar….
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