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MANY POLICY lessons can and must be learned from Ireland’s banking and financial crisis to avoid future repetition of past mistakes. One such is the failure of the system of checks and balances to operate in two areas: for banks in managing financial risk, and for Government in managing the economy. Bank management and the financial regulator either ignored or failed to appreciate the systemic risk posed by concentrated loan exposures in the commercial property sector.

Government, and it would seem its Department of Finance advisers, foolishly relied on temporary revenues – raised from capital taxes and stamp duty during an unsustainable property boom – to finance permanent increases in public spending. The economic downturn and the property crash greatly depleted tax revenues, and left Ireland with the largest budget deficit in the euro zone in 2009.