Financial Regulator admits 'insufficient response'
The state’s financial watchdog today said it did too little too late to cushion the blow of the global recession on Ireland.
The Financial Regulator said the scale and speed of the economic crisis was worse than expected and accepted more robust checks and balances were needed to keep banks in line.
The body had been severely criticised for not doing enough to dampen excessive and risky lending in the property bubble but claimed in its annual report that lessons have been learnt.
Chairman Jim Farrell vowed his office was now taking a tougher stance with banks.
“In retrospect, it is clear that the actions we took were insufficient and were not taken early enough. We took what we considered to be proportionate actions to mitigate the risks in the system,” the report said.
“Clearly this was not enough as the scale and rapidity of the crisis, which was exacerbated by events such as the Lehman (Brothers) collapse, greatly exceeded forecasts.”
A damning study released in May found the downturn here was magnified by the failure of the Financial Regulator to control the property bubble.
The Financial Services Consultative Consumer Panel, tasked with overseeing the Regulator’s work, said people had lost money because there was no proper regulatory structure in place.
The former chief executive of the Regulator, Patrick Neary, was one of the early casualties of the country’s banking crisis when he stepped down in January over the scandal surrounding directors loans at Anglo Irish Bank.
However, Mr Farrell defended the body’s efforts to tackle the crisis and said the scale of the downturn made its job more difficult.
He vowed the watchdog was now taking a more hands-on approach to regulation with its staff sitting in on audit, board and other meetings at banks.
Institutions will also have to give more details to the regulator while independent directors must play a more active role in questioning and challenging management decisions.
The Regulator also said the scandal of Anglo’s loans to directors will not be allowed to happen again.
Mr Farrell said: “Since September 2008, in response to these events we have fundamentally changed the way we regulate, to take a more intensive and hands-on approach to the institutions benefiting from the State guarantee.”
The watchdog said its actions had been insufficient to head off the crisis at home because predictions were based on forecasts that grossly underestimated the scale of the downturn.
“While more robust actions might have mitigated the impact of the crisis in Ireland it is unlikely that any action, however severe, taken by the Financial Regulator in isolation would have substantially reduced the scale of the problems,” the report said.
