:quality(70)/cloudfront-eu-central-1.images.arcpublishing.com/irishtimes/DWXFT62WZMH6JLL74W24A7KWS4.jpg)
It is six years to the day tomorrow since the story of the Davy bond-trading scandal broke.
Investigating it took so long, the Central Bank's Derville Rowland explained this week, because the Bank had to "go slowly in forensically turning the page on enormous volumes of data". Davy, though, did not have to go to such trouble to work out what had happened; all they had to do was ask their chief executive and deputy chairman.
The technical language of the Central Bank has the effect of pulling punches. Davy was "not operating in a conflicts of interest aware environment"; this led to "an elevated risk of investor detriment". Miriam Lord put it in simpler English: a group of Davy staff, which included its chief executive and deputy chairman, conspired to stiff a client by undertaking to get the best possible price for his bonds before secretly buying the lot for themselves at a knockdown price.
These facts should not have been a surprise to Davy when the Central Bank released its report; after all, the Davy board had overseen two independent reviews arising from the transaction. Yet Davy’s initial response was misleading; resignations were slow in coming; the names of the 16 people involved have still not been released.
:quality(70)/cloudfront-eu-central-1.images.arcpublishing.com/irishtimes/JZBREHETTR5CSAO6CYUGDUIVG4.jpg)
:quality(70)/cloudfront-eu-central-1.images.arcpublishing.com/irishtimes/K6XZUPDH7BF2FIQHWUK63LEGYY.jpg)
:quality(70)/cloudfront-eu-central-1.images.arcpublishing.com/irishtimes/PKK6QGNFZVUGWWVYHOMFMVSZ4U.jpg)
:quality(70)/cloudfront-eu-central-1.images.arcpublishing.com/irishtimes/FPSLSYJLVB3WPFCVTNZG4JZK7A.jpg)
Such lack of introspection is of a piece with other scandals in Irish finance. Long after the bank guarantee, AIB remained in denial about the scale of its losses. The former head of the NTMA, John Corrigan, pondered this at the banking inquiry in 2015: "were they misguided or were they being wilful in some form or fashion?" he asked, rhetorically. As chairman of Davy, Corrigan now finds himself facing similar questions about his board's lacklustre response to this crisis.
Even as the banking inquiry was ongoing, the banks' treatment of tracker mortgages was being investigated by the Central Bank; misconduct was "industry-wide", the Bank eventually found. The Bank's former governor, Patrick Honohan, in his 2019 memoir, attributed this misconduct in part to "a long-standing sense of corporate entitlement". That chimed with the observation last week that Davy's behaviour was symptomatic of a "patrician arrogance" within the firm.
Tackling such toxic cultures has proven difficult. “Cultural shortcomings remain in the system, a deficiency for which no obvious solution has emerged”, Patrick Honohan warned.
The overdue introduction of a Senior Executive Accountability Regime (SEAR), promised in the programme for government, will be a step in that direction. More powerful would be legislation to criminalise recklessness in the management of a financial institution, as has been introduced in the UK and called for by the Central Bank. It is difficult to understand how, in the 12 years since the bank guarantee, this can not have been a priority.