‘Nothing sinister’ in my leaving, says John Moran

Outgoing Department of Finance secretary general John Moran said there was "nothing sinister" in his unexpected resignation as he told the Dáil Committee of Public Accounts that Ireland's banks no longer present a systemic risk to the economy.

Mr Moran’s resignation comes only two years into a seven-year mandate. However, he told a scheduled hearing of the committee yesterday that his own personal target when taking the post was to be able to say Ireland had left bailout programme on his watch and was back in private debt markets.

“It has always been a principle of management of mine that you should always find a way to make yourself redundant, that if you become in your job in any way indispensable, you may miss an even bigger challenge or opportunities ahead.

"I am very positive about the direction of travel where we're heading. What we're seeing in the economy is a rebuilding of confidence and a clear sign of recovery. From my perspective . . we do not see a systemic risk issue in terms of the stability of our banks."

The reputation
He said the reputation of the Department has improved appreciably since he took over.

“I would not be truthful if I did not confess to a considerable degree of reluctance myself at taking on the task and the reputational risks of same, back in 2012.”

Citing parameters recently agreed for a pan-European bank stress test later this year, Mr Moran expressed confidence that no big shock was in prospect for Ireland’s banks. However, he did not entirely rule out that some new capital would be required.

“I think we feel that with the current levels of capitalisation which are in the banks and where they have put it, at least at first instance it seems like we are in a very good position with respect to going into those tests,” he said.

“I think we are now looking at a stress test which looks like a normal stress test for banks that are operational. Where our banks have a weakness in respect of the stress test is that they aren’t all generating capital in terms of profitability . . . .

“The mere fact that in a stress test one says a bank may need more capital is not necessarily itself a negative thing.

“What we do think is that the magnitude of capital, even were it to be required, and I’m not saying it would, would not be such as to create one of these financial stability shocks to the system, and that’s the information we’re getting from the banks.”

Asked where banks would raise additional capital if needed, Mr Moran said Allied Irish Banks could probably raise private capital now if required.

He had earlier said the Government could start discussing whether to sell down some of its stake in AIB once it returns to profitability. Some analysts believe the bank will make that breakthrough later this year.

In respect of the Government’s shareholding, Mr Moran said the question was to analyse when best to sell.

“Do we think we have the asset at a point where we think that’s maximum value for the State? Or do we think it is better for us to be the investor in the bank, continue to hold dominant share?”

He also said possibility of increased valuations on the shares in the surviving banks – AIB, Bank of Ireland and Permanent TSB – meant that the point could be reached where their bailouts had "actually not cost the State anything".