Honohan rules out further inquiry

There will not be any substantial need for further factual investigations regarding the performance of the Central Bank and Financial Regulator, the governor of the Central Bank told an Oireachtas committee this morning.

In a hard-hitting report published last week, the new Central Bank governor Patrick Honohan sharply criticised the Financial Regulator, the Central Bank, the senior management of the banks and Government budgetary and fiscal policy for causing the banking crisis.

He said there were major failures in regulating the banks and in the maintenance of the State’s financial stability at a systemic level. There had been a comprehensive failure of bank management and direction “to maintain safe and sound banking practices”.

Instead, the banks incurred huge external borrowing in the international money markets “to support a credit-fuelled property market and construction frenzy”, he said.

At an appearance before the Oireachtas Joint Committee on Finance and the Public Service this morning, Prof Honohan acknowledged that he had told the committee last December that it was "still hard to understand" some of what had happened in the Irish financial sector.

However, he said today "we now know a lot more about the dimensions of the crisis".

Prof Honohan outlined a number of areas "which deserve further discussion" but which he said were just outside the terms of reference for his report.

These are: an independent review of risk management and governance of these matters for at least the two big banks, looking particularly at the period 2003-2008; further exploration of the role of accounting and auditing professionals, although this should be deferred as the due diligence for these purchases seems to have revealed some issues around loan documentation.

He also says that there may be a case for commissioning a study of the operations of the mortgage intermediaries in loan origination during the boom period.