Banking Inquiry: twice as many buffers needed to avert crash

If the Department of Finance had twice as many buffers in place the economic crash could have been averted, a former Secretary General has said.

Tom Considine told the Banking Inquiry he believed it had sufficient measures to deal with any potential shock but admitted that had proved to be wrong.

He said: “I remember voices threatening risks. We did as well. The Minister for Finance repeatedly stressed the risks but at the end of the day we have come to a conclusion.

“The conclusion we arrived at were there were sufficient buffers to cater for a likely shock, that turned out to be wrong.”

Under questioning from Socialist Joe Higgins TD, Mr Considine added: “If we had greater buffers in the system say twice as much as we had, we would have been able to withstand this.

“I am not saying we are not responsible.”

Mr Considine said measures were taken from 2006 to cool the property market and to stabilise the Irish economy, the banking inquiry heard today.

He said he believed public finances were sufficiently strong at that time to deal with any shock.

Mr Considine said any risks to the economy were acknowledged and highlighted by the then Minister for Finance Brian Cowen in his Budget speech.

The former Secretary General said: “In addition, interest rates were rising, the 2006 Budget contained provisions to further cool the property market and the Department of Finance sought to keep the increase in public expenditure as low as possible.

“Given the general belief that the economy was strong and the then perceived healthy state of the public finances, the pressure on Government for additional spending and tax reliefs was intense.

“Clearly, lower increases in day-to-day spending would have increased the buffers available to tackle the crisis.

“Nevertheless, the 2006 Budget did include a range of measures restricting tax reliefs on property related projects.

“Those measures were designed to cool the property market without themselves causing the market to crash.”

Mr Considine said those measures had proven to be inadequate to prevent the crash in 2008.

He said he very much regretted that he had not foreseen the crisis during his time at the Department from 2002 until 2006.

The former Secretary General said staffing levels were sufficient to deal with the duties of the Department of Finance.

Mr Considine added "the Central Bank and the Regulatory Authority had the structures needed to decide the required staffing levels for the functions they were required by legislation to perform.

“Clearly, with the onset of the crisis it was necessary for all three organisations to review their staffing and skill levels and to move as quickly as possible to secure and allocate any additional resources required to manage the crisis.

“With the benefit of hindsight, more consideration could have been given to how the legal framework would cope with a major crisis.”

Mr Considine said he is earning a pension of €118,000 from his role as Secretary General at the Department of Finance.

Fine Gael TD John Paul Phelan asked how he came to be given a board role on Bank of Ireland in 2009.

Mr Considine said former Minister for Finance Brian Lenihan asked him to take the position.

He said he was reluctant to take the position but did take it. He confirmed it was a remunerated position and that he earned €98,000 last year as the Bank of Ireland public interest director.