European Central Bank sharply criticised in report

The European Central Bank came in for heavy criticism as the committee called on the Government to seek an amendment to European law to “allow” the Frankfurt-based institution participate in parliamentary inquiries.

The ECB’s actions on two fronts were singled out by the inquiry, even as its chairman, Ciarán Lynch, said in his introduction to the report that Ireland’s bailout “became inevitable” in the two years after the State banking guarantee of September 2008.

“The ECB nevertheless put the government under undue pressure to enter a programme, but also insisted that there would be no burden sharing with bondholders,” Mr Lynch said.

Obligation

While the committee recognised there was no legal obligation on the ECB to co-operate with the inquiry, Mr Lynch said its stance was in “stark contrast” to full co-operation from the EU Commission and the IMF.

However, the ECB welcomed the report. “On many occasions since the start of the Irish programme the ECB has been transparent regarding its role in supporting Ireland throughout the crisis, addressing the issues mentioned in the report in various formats and settings, including in the context of its accountability to the European Parliament,” said an ECB spokesman.

The report said the ECB made it clear “that there was no euro zone-wide initiative coming and the sovereign was to ensure that no bank was to fail”.

Noting acute concern in Frankfurt about escalating support for Ireland’s banks in 2010, the report attributed a pivotal role to a threatening letter from then ECB chief Jean-Claude Trichet in advance of the bailout. “The letter from the ECB to minister Brian Lenihan on November 19th, 2010, threatened that it would not continue to provide [emergency liquidity assistance] support for Irish banks if Ireland did not enter into a bailout programme.”

Saying IMF officials favoured steps to compel senior bank bondholders to take losses, the report said the ECB opposed such moves on two occasions. “The ECB position in November 2010 and March 2011 on imposing losses on senior bondholders, contributed to the inappropriate placing of significant banking debts on the Irish citizen.”