Cantillon: Intriguing omission at banking inquiry

Frank Browne was head of the Central Bank’s financial stability unit between 2003 and 2010

Frank Browne:  his written statement appears to contradict earlier evidence given by former Central Bank governor John Hurley. Photograph: Bryan O’Brien

Frank Browne: his written statement appears to contradict earlier evidence given by former Central Bank governor John Hurley. Photograph: Bryan O’Brien

 

The Oireachtas banking inquiry could not possibly have heard evidence from all the relevant players in government, banks, regulators and elsewhere. But having completed its public hearings, it seems strange it did not call Frank Browne, head of the Central Bank’s financial stability unit (FSU) between 2003 and 2010.

Browne has lodged a written statement with the inquiry which is expected to be published shortly. It appears to contradict earlier evidence given by former Central Bank governor John Hurley. Browne has also reportedly alleged the bank did not forward all relevant information to the inquiry.

This is important evidence and it would have been good to hear Browne, who held a key position in the build-up to the crisis, give evidence. As it is, the inquiry will now have to make a call in private on what went on in the Central Bank in the crucial years when the bubble was inflating.

While we await publication of Browne’s statement, it appears he feels the bank was not paying sufficient attention to warnings coming from the FSU and that messages sent out in public – in its annual financial stability report and elsewhere – were overly sanguine. On the face of it this seems to contradict Hurley’s evidence, which was the bank did not foresee the possibility of a major crisis.

The timing is important. Reports on the crisis from the Nyberg commission and Regling and Watson suggested the Central Bank could have averted some of the problems if it had started to sound warnings around 2005.

In turn the Financial Regulator, then a separate body under a common board, could have tightened up lending rules for banks. However, this never happened and what was published in the annual financial stability reports did not foresee the possibility of impending catastrophe.

It is thus interesting and relevant that Browne, now retired, says his section saw warning lights from 2004 on but these were not heeded. It would have been intriguing to hear Browne’s view of this and to listen to him being questioned by the committee. Nonetheless, his full written statement will be interesting and will provide yet another area of conflict on which the inquiry will have to make a call.

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