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Thursday 7 December 2023 Dublin: 9°C
Mark Stedman David Doyle
Bank Guarantee

Cowen nodded to Lenihan and said 'Come on, let's have a chat'

The former secretary general at the Department of Finance has been giving evidence at the banking inquiry.

DAVID DOYLE HAS been asked whether or not the Department of Finance was prepared for the banking collapse.

Fianna Fáil TD Michael McGrath asked the former secretary general at the department why there was no plan in place in 2008 to put banks into examinership if necessary.

“At the end of September 2008, when the proverbial hit the fan, the department did not have resolution legislation in place to deal with the situation where a bank was insolvent or where the department felt that the bank should be put into some sort of examinership,” McGrath stated.

In response, Doyle said: “A lot changed between January and September 2008. The financial markets continued to melt down and then reached a crisis point”.

He added that putting a bank into examinership gives rise to a number of issues that would not occur when placing a company into examinership.

“If you appoint an examiner to a bank, the first thing that happens is that a red card goes up on every money desk in Europe and the world and funds are recalled and there’s no fresh funds made available so you initially trigger a financial crisis for that institution.”

Earlier in the session, Doyle recalled the fateful night of the bank guarantee, 29 September 2008.

He said that at the start of the meeting the then Finance Minister Brian Lenihan was strongly of the opinion that Anglo should have been nationalised, but changed his mind as the debate went on.

michael mcgrath

Doyle noted that at one point the Taoiseach, Brian Cowen, “nodded to the minister and said ‘Come on let’s go out and have a chat’ and so they went out a had a chat”.

“I don’t know how long that lasted, I can’t recall. It certainly wasn’t five minutes or ten minutes, it could have been longer.”

He said he “couldn’t swear” on the time this discussion took place but noted it was “very late”.

Eventually the Taoiseach came back in and said they had decided to reccommend to the cabinet a guarantee and that Anglo was not being nationalised. I’m pretty certain he said ‘for the moment’.

Doyle said Lenihan did not indicate any disagreement with this stance.

Central Bank criticism 

Doyle said the Central Bank “placed undue reliance” on the financial regulator’s assessments of Irish banks, who in turn did not properly scrutinise the institution’s financial records.

In addition, he said his own department was wrong to “take at face value the assessment of both the Central Bank and the regulator”, stating: “I regret this.”

He said the guarantee was necessary, as was the nationalisation of Anglo Irish Bank to stop its collapse – something he said could have triggered a “wider banking collapse”.

“On 29 September it emerged that Anglo had exhausted all avenues in terms of raising funds and was heading for the red with the Central Bank. This was a key trigger for intervention. The other banks had experienced severe liquidity issues also.

A failure to address the liquidity issues would have been catastrophic. The option of doing nothing was simply not a runner.

Looking back, the government were in an impossible position. They were on the horns of a dilemma. Action had to be taken.

Doyle said the Central Bank governor informed those present at the meeting that then European Central Bank president Jean-Claude Trichet had made it know “that no bank failure could be allowed, or words to that effect”.

david doyle new

Doyle noted that draft legislation to nationalise a bank was ready at this time.

He said that a huge increase in lending, combined with an “over-reliance” on the property market and “loose and uncoordinated planning controls” heightened the collapse.

“It is fair to say that in the decade up to 2008, the demands from all sides were for more public services and less taxation. The typical response to increased level of spending in many quarters was that it wasn’t big enough. The outcome was that from 1998 to 2008 inclusive, total government current and capital spending trebled.

Doyle was appointed secretary general at the department in July 2006 and retired in January 2010. Prior to this, he was the second secretary general in the Sectoral Policy Division (Public Expenditure Division) of the department from 2001 to 2006.

Originally published: 16.47

Read: Those banking inquiry leaks to the media have been referred to gardaí

Read: Seán FitzPatrick and David Drumm have been asked to come before banking inquiry next month

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