Below is a series of observations from the report produced by former IMF officials Klaus Regling and Max Watson which investigates the causes of the banking crisis
While global and domestic factors thus interacted in mutually reinforcing ways, it is feasible to disentangle the main homemade elements in the debacle.
Fiscal policy heightened the vulnerability of the economy.
Bank governance and risk management were weak – in some cases disastrously so.
The systemic impact of the governance issues crystallised dramatically with the Government statements that accompanied the nationalisation of Anglo Irish Bank.
Ireland’s banking exuberance indulged in few of the exotic constructs that caused problems elsewhere. This was a plain vanilla property bubble, compounded by exceptional concentrations of lending for purposes related to property – and notably commercial property.
Official policies and bank governance failings seriously exacerbated Ireland’s credit and property boom, and depleted its fiscal and banking buffers when the crisis struck.
The Government‘s procyclical fiscal policy stance, budgetary measures aimed at boosting the construction sector, and a relaxed approach to the growing reliance on construction-related and other insecure sources of tax revenue were significant factors contributing to the unsustainable structure of spending in the Irish economy.
It is clear that a major failure in terms of bank regulation and the maintenance of financial stability failure occurred.
There is prima facie evidence of a comprehensive failure of bank management and direction to maintain safe and sound banking practices,instead incurring huge external liabilities in order to support a creditfuelled property market and construction frenzy.