#Open journalism No news is bad news

Your contributions will help us continue to deliver the stories that are important to you

Support The Journal
Dublin: 6°C Monday 18 January 2021

Bankers were "unwise, rather than criminal" during the Celtic Tiger

But the Central Bank governor also wants to explode a few myths about the banking crisis.

Central Bank governor Patrick Honohan
Central Bank governor Patrick Honohan
Image: Mark Stedman/Photocall Ireland

Updated at 7.50pm

IRELAND’S LAWS TO deal with reckless behaviour from those in charge of failed financial firms need to be stronger, according to the head of the Central Bank.

But governor Patrick Honohan said it was mainly “unwise, rather than criminal” work from bankers that had lead up to the country’s banking crisis.

He was speaking at a Paris conference about some of the “mythical” commentary which surrounded the troika’s bailout programme for Ireland.

Honohan said it was a fact that the “unrestrained and reckless” behaviour of the banks destabilised the Irish economy and the state’s finances.

“With greater prudence by management and boards of the lending banks, this bubble could not have happened,” he said.

It is also worth emphasising that international lenders too were an essential part of the process: they were surely lucky to recover all of the funds they complacently advanced to fuel the boom.”

International Monetary Fund Conferences Honohan earlier this year Source: Sasko Lazarov/Photocall Ireland

Conviction myth

However Honohan, whose institution is also responsible for regulating the financial sector, said it was a myth that no bankers were convicted over their actions before the crisis – although he acknowledged none had been sent to jail.

But the Irish legislative framework deserves to be strengthened to take account of egregious recklessness in risk-taking by those who were in charge of failed financial firms,” he said.

Recently the UK enacted legislation of this type which I believe could be usefully mirrored in Ireland.”

#Open journalism No news is bad news Support The Journal

Your contributions will help us continue to deliver the stories that are important to you

Support us now

Honohan also said it was a myth that the bank bailout caused the recession, or that it was primarily the bank guarantee that pulled the trigger on austerity.

“A glance at charts of output or employment confirms that the economy had already pretty much hit bottom by the time of the bailout,” he said.

The same charts also show that the Irish downturn – led by an exceptional construction crunch – was well under way by the time of the notorious bank guarantee.”

But he agreed the IMF had signed off on a bailout programme that risked creating unsustainable debt in the interest of stopping a spillover effect to other countries.

First published 1.34pm

READ: The government says it saved over €10bn by complaining to the Troika >

READ: We asked this expert if people were paying over the odds for property again >

About the author:

Peter Bodkin  / Editor, Fora

Read next: