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Honohan explains infamous interview

Published 25/06/2015

Patrick Honohan was appointed governor of the Central Bank in 2009
Patrick Honohan was appointed governor of the Central Bank in 2009

Ireland's banking chief has said it would have been a big mistake to flag up his infamous 2010 radio interview where he revealed the looming multibillion-euro bailout.

Patrick Honohan, the outgoing governor of the Central Bank, said he phoned RTE's Morning Ireland from Frankfurt after worrying he was not doing enough to stem a run on the Irish banks.

He said he believed then taoiseach Brian Cowen and the late Brian Lenihan would have tried to stop him if they had known.

"I thought I was safe enough on the political arena," Mr Honohan told the banking inquiry.

"I knew that they would not be all that happy that I made the announcement but I didn't realise they would be so unhappy.

"I was not going to say to them 'do you think I should go on the radio?'

"I think the answer would have been no."

Mr Honohan said. "I think it would have been a big mistake to have left myself in a position where I'd be told 'I know you are independent but don't'."

The previous evening, at a meeting of the European Central Bank in Frankfurt, Mr Honohan said he was asked to press Mr Lenihan into formally seeking a bailout and he stepped outside to phone the minister.

"He was very cross," Mr Honohan said.

"'Why are they trying to rush me? What's this?'

"There was no talking to him," Mr Honohan said.

"I went back into the meeting, tail between my legs and I wondered what was going to happen next."

The straight-talking banking regulator also denied he knew anything about the ECB allegedly trying to force change of government in countries in Europe, particularly in Italy, at the height of the financial meltdown.

"There certainly was no ECB discussion about anything like that," he said.

Mr Honohan said he believed Ireland was on course for a formal bailout appplication on November 4 2010, that negotiations between Mr Lenihan and European chiefs had been planned for November 11 but were delayed for three days.

In Dublin at the time, ministers, including the taoiseach, were repeatedly in denial mode about talks on a rescue package.

The 65-year-old was appointed governor in 2009, one year after the main banks were guaranteed to the tune of 440 billion euro and a year before Ireland ended up with an 85 billion euro international bailout.

That taxpayer-funded rescue was 64 billion euro with the outgoing governor telling the state inquiry in January that he expected the final bill to be about 40 billion euro.

Mr Honohan said he was motivated to ring RTE after 8am on Thursday November 18 2010 because 900 million euro of deposits had flooded out of Irish banks the previous day - a record run on the banks.

"There was a sense of excitement, concern, alarm, I would say in Frankfurt, with the people I talked to informally on the Wednesday night," he said.

"I started to worry that I was not doing enough, that there was a sense of panic both in official circles but especially in the market and they had these outflows and I thought I should be doing something."

Reflecting on going public and gambling that Ireland would secure a bailout, Mr Honohan added that he "got away with it".

In a day-long questioning at the Oireachtas banking inquiry, the banker reviewed the months leading to the bailout and his thoughts on the September 2008 guarantee.

He said it should not have included Anglo Irish Bank or Irish Nationwide, and Anglo should have been nationalised when the security was agreed.

Mr Honohan said that he knew the banks needed a bailout of 25 to 30 billion euro when he took the job as governor a year later but that suggestions of Ireland being bailed out were not expressed by others until March 2010.

He said he discussed it with Mr Lenihan by phone from France before another phone call in May, this time when the International Monetary Fund's representative in Ireland, Professor Ashoka Mody, rang him while he was at Heathrow Airport in London to suggest a "precautionary line of credit".

The idea was rejected by the Department of Finance.

Mr Honohan said he could not shed any light on whether former European Central Bank president Jean-Claude Trichet threatened Ireland into rescuing the banks.

But he said he believed Mr Trichet's account that Ireland was not treated any differently from any other European state which was advised not to let a bank fail.

"I don't know why we can't exactly disentangle what was said at that point because it seems like it was rather innocent," Mr Honohan said.

Mr Honohan told the Oireachtas inquiry that the late minister wanted to support a Greek bailout in March 2010 at the time, believing that it would make money for Ireland.

He told the hearing: "That's not the reason, I said.

"I said the reason is we could be next and he said 'No, I've been talking to people in Brussels and they said Portugal could be next'."

The governor said the major shock in the financial sector from 2010 to 2011 was the scale of the rescue which was needed by Allied Irish Banks, in the region of 20 billion euro.

"That was the biggest surprise," he said.

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