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... so, what's the view from Dublin?

By Brendan Keenan

Published 09/02/2016

The IFSC building in Dublin
The IFSC building in Dublin

Why? That is the question. There seems to be general agreement that the banking inquiry did not get much beyond what happened. As to why, we are little the wiser.

This matters, because this was no ordinary collapse. As economist Colm McCarthy stressed, it is highly unusual - virtually unprecedented - for all the banks in a country to go bust during a crisis. Grotesque and bizarre as well, to complete the famous phrase.

Most of the disappointment around the inquiry results centred, not on the absence of "why" but of "who".

That in itself should give pause for thought. Names attract attention and the absence of personal blame risks limiting attention on evidence about the climate in which they operated. But therein lies the answer to "Why?"

It is not tenable that, in those years, every bank, regulatory agency relevant government department and political office was staffed by knaves and fools. Financial systems do not collapse because of personal inadequacies.

Something else was going on. We need to know what it was. Much more to the point, we need to know if it is still going on. Are the changes which have come about sufficient to prevent conditions where sensible people are swept away on the tide of madness? The one exception to the no-blame approach was, of course, Jean Claude Trichet. His place in the headlines illustrates the difficulty of separating the man from the machine.

Mr Trichet is gone but the ECB is still with us, and not enough has changed. Before the crash, it was not even clear if the bank could act as lender of last resort if required. When it was required, it had to make things up as it went along - thereby inventing the remarkable doctrine that it would lend to insolvent banks (naughty, naughty) provided their host governments made them completely solvent under terms set down by the ECB.

That was not all, or maybe not even mainly, Mr Trichet's doing. Blame lies with the absence of any plausible architecture or clear mandate for the role of the ECB in banking system. It now has a supervisory responsibility which may help prevent a banking crisis on this scale in future but political disagreements means we are not much the wiser as to what would happen if one did occur.

Belfast Telegraph

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