Lenihan defends finance department

Minister for Finance Brian Lenihan has today come under pressure to extend the terms of reference of the Commission of the Investigation into the banking crisis.

Mr Lenihan was appearing before the Oireachtas Joint Committee on Finance to discuss the terms of reference in the wake of the reports in the banking crisis from Central Bank governor Patrick Honohan and banking experts Klaus Regling and Max Watson.

Addressing the committee, Mr Lenihan said Mr Honohan's report would form a "strong basis" for the commission of investigation with broad terms of reference to investigate all institutions. The terms would be those identified in both reports as being "capable of investigation in a legally verifiable process" of covered the institutions.

The Minister recently announced a wide-ranging review of the Department of Finance and its management of the financial crisis will be carried out by independent experts.

However, proposing amendments on the terms of the inquiry, Labour finance spokesman Joan Burton called for the office of the Minister for Finance and the Department Finance to be brought under the remit of the commission.

She also urged the time frame for examination - which currently runs up to the night of the bank guarantee in September - should run up to January 15th, 2009, the point at which it was acknowledged that Anglo Irish Bank was to be nationalised and Irish Nationwide "would also, in effect, be looked after by the Government".

The Government and Department of Finance had to be included under the inquiry, she continued. An inquiry that omits the office of the Minister and his department would "lack fundamental credibility" if those two participants are left outside the remit, the Labour frontbencher said.

Fine Gael's Michael Noonan, recently promoted to finance spokesman, said he believed the cut-off point of September 28th/29th, 2008, for issues to be examined was a mistake and that its remit had to extend beyond the nationalisation of Anglo. Noting Mr Honohan had advised an examination of the role of auditors in the banking crisis, the Limerick East TD also called for auditing to fall under the auspices of the commission.

Agreeing with Ms Burton, Mr Noonan called for the Department of Finance to be investigated by the commission to see if it was "fit for purpose" in the past and the future. The Fine Gael also said the banking reports had been "quite blunt" over political responsibility for the macro economic policies and said these should be examined.

Responding, the Minister said he agreed with Ms Burton and Mr Noonan that the role of the accountancy profession should fall within the terms of reference. Mr Lenihan said he also agreed with Mr Noonan's point on the time limit, with "substantial interaction" between the regulator and the banks following the September date of the bank guarantee. The Minister indicated he would look at a later cut-off date but said this was unlikely to extend to the present day.

However, the Minister told the committee hearing nothing had arisen to suggest the Department of Finance should be subject to the commission of inquiry, and that the banking reports did not suggest the department should be investigated by the commission. He said it was clear the banking reports viewed "crisis management" at the department as excellent.