Taoiseach defends his role in Ireland's financial crisis

Taoiseach Brian Cowen has defended his role in failing to prevent the financial crisis, saying independent authorities gave “fundamentally wrong” advice to Government that Irish banks had sufficient capital to deal with the downturn.

Mr Cowen told the North Dublin Chamber of Commerce event in Dublin City University tonight that “grave mistakes” were made in the judgment of the capital adequacy of Irish banks and the banking crisis had done untold damage to the country.

“The advice at the time was that the balance of evidence suggested that the banks had sufficient capital to absorb the likely losses but, that there were vulnerabilities and risks. With hindsight this proved to be fundamentally wrong, however, those were the views expressed at the time,” he said.

“We now know grave mistakes were made in the judgment of the capital adequacy of the Irish banks and the assessment of future loan losses.

It is, however, important to note that no one in the independent authorities ever advised the Government that the capital adequacy was not sufficient or that higher capital adequacy ratios should be imposed.”

Mr Cowen said Governments must never again in property markets via tax incentives or other measures to a degree which might make property bubbles possible.

While international factors were a critical component in the crisis, it would be wrong not to accept it was made worse for Ireland because of domestic vulnerabilities. He also referred to Lehman Brothers, saying its failure in 2008 changed the world forever.

“It was like flicking on a switch.”

Responding to criticisms of the inclusion of Anglo Irish Bank in the Government guarantee scheme, he said excluding it would have resulted in contagion for other banks in Ireland.

The Taoiseach indicated while he was often asked to comment on named individuals, he could not do so for legal reasons.

“While privately I have been deeply angered about certain developments, my public comments have often not been able to reflect this. This is because I and the Government strongly support the independence of the gardaí and the legal system. As Taoiseach, I am determined that no comments which I make will in any way hamper the role of the gardaí or the judiciary or other regulatory investigations.”

Referring to reported instances of small businesses being “stone-walled” when it came to getting credit, Mr Cowen said that would not be tolerated. The Taoiseach said he had asked Minister for Enterprise Batt O'Keeffe to meet bank representatives to ascertain what they were doing for viable but vulnerable businesses.

In his speech, Mr Cowen warned unscrupulous bankers involved in fraud or other crime will face convictions.

“The trust that was given to the banks was misplaced and it will take many years for banks to re-earn that trust,” he said.

Noting the mistakes, he said banks took excessive risks lending, there was inadequate regulation, property tax incentives should have been removed earlier and there were stunning failures of corporate governance.

“While Government shares responsibility for its role in these mistakes, it is noteworthy that many of the strongest critics of the Government were silent on these issues prior to the crisis and indeed were proposing measures such as the radical reduction or abolition of stamp duty which would have made the position much worse,” Mr Cowen said.