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Dublin: -2 °C Thursday 27 November, 2014

5 key issues facing the banking inquiry before it even starts

The government is pressing ahead with an inquiry but it will be a while before it starts properly and there are a number of outstanding issues before it does.

Government Buildings reflected in a fountain in front in the main courtyard.
Government Buildings reflected in a fountain in front in the main courtyard.
Image: Sam Boal/Photocall Ireland

THE GOVERNMENT HAS announced that it will move to establish a banking inquiry early next week in the wake of the conclusion of the trial of two former bankers at Anglo Irish Bank.

With two former executives at the defunct bank found to have participated in an illegal lending scheme involving some €450 million, the government is now pushing to establish a public inquiry that will examine just what happened in the lead-up to and on the night of the now infamous bank guarantee of 30 September, 2008.

In case you need reminding, the decision to issue a blanket guarantee worth some €440 billion has ended up costing Irish taxpayers €64 billion.

It has been the reason for a series of austerity budgets since 2008 and it is why Ireland was forced into an EU/IMF bailout in 2010 with debt repayments that will go on for decades.

It’s worth remembering there have already been a number of investigations into the collapse of the Irish banking system. These include the report of the current Central Bank governor Patrick Honohan, the Nyberg report and the Regling-Watson report.

But politicians want their turn at examining the issues and bringing politicians, civil servants and public officials before them in a public environment and forcing them to account for their actions.

“It will all be done before the court of public opinion and people will be able to judge these matters,” Minister Brendan Howlin said today.

The phrase ‘political show trial’ has been uttered more than once but before we can even focus on what might happen when these faces from the past come before an inquiry made up of politicians there are a couple of outstanding issues…

1. Who will sit on the inquiry committee? 

We know that Labour’s Ciarán Lynch will chair the inquiry that will be carried out by a specially-established Oireachtas committee. But the identity of its other members is unclear. TDs as well as Senators will most likely be involved and the government will ensure it has a majority of its members on the committee.

Possible members include the vice chair of the Public Accounts Committee Kieran O’Donnell, indeed almost all members of the PAC are likely to be in with a chance of participating. The same would apply to those who sit on the Oireachtas Finance Committee. Coincidentally Lynch will almost certainly step down as chair of that committee once the inquiry gets up and running.

screen-shot-2014-02-13-at-10-38-50

Source: Oireachtas TV

Opposition parties will be allowed to nominate who they want to sit on the committee but the final say rests with the Dáil’s Committee on Procedures and Privileges and ultimately the government. Fianna Fáil’s Michael McGrath is currently the most likely opposition politician to feature. The identities of Sinn Féin and independent members are unclear.

Obvious choices like Pearse Doherty and/or Shane Ross may be prevented from taking part due to their previous comments about the financial collapse and bankers. A government source has previously spoken of the need for “political savvy” over accounting and banking expertise.

All that said, accounting and banking expertise will be needed which is why the committee is expected to have dozens of support staff comprising of accountants, economists and experts on financial regulation. As well as some 48 staff it will be roughly allocated around €5 million in funding.

2. What will it examine and how far can it go? 

The buzzword here is ‘scoping’. Before any public sessions can be held the inquiry is likely to spend a number of months scoping out the parameters of the inquiry and establishing terms of reference.

Essentially this is figuring out what exactly the committee is going to look at and who it’s going to call. The Taoiseach has previously said that the inquiry will focus on three main areas:

  1. the bank guarantee and the events leading up to it;
  2. the role of the banks and their auditors;
  3. the role of State institutions.

Lynch stressed today that he wants to ensure there is consultation and agreement with members, saying: ”I think my role as chair is not to come into this with a proscriptive position, but to get the views of all inquiry members.”

In doing this, it might be worthwhile if the committee considers a report already carried out by the PAC in July 2012 which examined the crisis in the domestic banking sector and provided a ‘framework for a banking inquiry’. The nearly 300-page report should be required reading for anyone involved in the special committee.

3. Avoiding legal difficulties 

anglo-irish-court-case-22-2

Willie McAteer and Pat Whelan

Source: Brian Lawless/PA

In establishing the terms of reference and examining the role of banks, the issue of Anglo may be a thorny one. While the convictions of Pat Whelan and William McAteer and the acquittal of Seán Fitzpatrick draw a line under the Maple 10/Quinn loans issue there are two other criminal trials involving the bank that are pending.

Were they to get under way this year it raises the possibility that the inquiry will be forced to stop or to avoid the Anglo issue altogether. There will be questions about the value of any inquiry that excludes Anglo – a situation that would be “nearly akin to Hamlet without the Prince” according to one senator.

4. Making sure they have all the documents and records 

As we’ve reported extensively in recent months, the Department of Finance has lost letters concerning Bank of Ireland after the guarantee was issued and has been unable to find them despite an extensive search. This raises huge questions about the integrity of documents related to the guarantee.

The Department of Finance has started to document all the records it possesses and to cross reference these with other documents in that period with a view to ensuring the completeness and integrity of records from the period. It says that it is “not aware” of any other missing documents.

The Department has asked banks to preserve internal recordings of conversations and make them available to the banking inquiry in the wake of the emergence of the Anglo Tapes last year.

As well as this, the Taoiseach has consistently bemoaned the lack of records in his department which explain the rationale behind the guarantee decision. A schedule of records, obtained by Fianna Fáil, disputes this version of events and details a raft of records that are all currently restricted due to government confidentiality. Will the committee have access to these records?

5. Drawing up a witness list… and making sure witnesses attend 

FILE PHOTO Patrick Neary

Source: Laura Hutton/Photocall Ireland

The witnesses are unlikely to appear any time soon but when they do they will be drawn from all spheres – political, civil service, Central Bank and people “in and around” the guarantee, as one source close to the inquiry said today. This will include officials from accountancy firms KPMG and Merrill Lynch, who provided key advice at the time.

The former financal regulator Patrick Neary (above), around whom huge questions have arisen after the Anglo trial, will almost certainly be called to attend. Former taoiseach Brian Cowen and his predecessor Bertie Ahern will also be asked to appear and have said that they will. Other notable and likely witnesses include former Department of Finance official Kevin Cardiff and serving and former executives at the country’s leading banks whose account of events was recently published by the Irish Times.

In assessing what witnesses to call the committee may face further legal issues. The recent Anglo case shone a light on the involvement of its former chief executive David Drumm. His US residency has made it impossible for gardaí to interview him and it’s almost certain that the committee will face the same problems.

The committee will have powers of compelability, akin to those enjoyed by the High Court, but it will hope that it won’t come to that and that the willingness of the many to attend will result in the few who are not being pressured into doing so.

IN-DEPTH: 30 Days in September: An Oral History of the Bank Guarantee

Read: Everything you need to know about the bank guarantee, but were afraid to ask

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