Banking chiefs should not be put on the “bold step” for expressing views on regulatory or economic policy if Irish society is to avoid repeating a mistake before the financial crisis of drowning out contrarian voices, according to the head of the banking lobby.
Deputy Central Bank governor Ed Sibley said earlier this month that bankers calling for a relaxation of mortgage lending rules introduced in 2015 suggested "echoes" of pre-crisis hubris. Supervisors internationally should resist pressure to ease regulation, particularly towards the end of an economic cycle, he said.
Mr Sibley's comments were seen as a veiled reference to AIB chief executive Colin Hunt's comments in September that the time has come to loosen the mortgage rules, which are currently subject to an annual review.
"Can we not have a debate about macro-prudential rules without people feeling that they're on the bold step? We need to be mature about this," Brian Hayes, chief executive of the Banking & Payments Federation Ireland (BPFI), told The Irish Times, adding that the lobby group remains "broadly in favour" of the limits.
“We live in a free society. We should not be afraid of contrarian views. In the past, anyone who had a different view was shot down. If we’ve learned anything from the crisis, it must be that different voices should be allowed into the debate. And if the banks have a different view on some issues, they have to speak up and not be afraid about it.”
Finish banking expert Peter Nyberg found in a 2011 report on Ireland's financial crisis that a tendency to "groupthink" that suppressed contrarian views fuelled the boom before the 2008 crash. He said lax regulatory oversight, bankers' flawed lending decisions and herd-like mentality, government policy, and flag-waving media all contributed to the bubble.
The State’s banks needed a €64 billion taxpayer bailout following the crash – tipping the Government into an international bailout programme – as lenders’ bad loans soared. The industry has been engulfed in recent years by the €1 billion-plus tracker mortgage scandal, and political outcry over their increased reliance on loan sales to cut their non-performing loans levels.
Johann Thijs, chief executive of Belgian lender KBC Group, which rescued its Irish unit during the financial crisis, courted controversy earlier this month when he bemoaned how Irish regulators had focused for too long on the tracker debacle and the sector's other past misdeeds, saying: "[We] would recommend to Central Bank of Ireland: come on, guys, turn the page."
Mr Hayes initially characterised the comments as “unfortunate” in interviews. He has now concluded that it was “a bad week and a bad mistake”. He said Mr Thijs’s apology the following day for his remarks was the right thing to do.
“Because words matter in Ireland,” said Mr Hayes. “There is a huge sensitivity around the banks in Ireland because of the scandals. The banks have a mountain to climb in terms of reputation and lost trust.”
Still, he said it needs to be acknowledged that KBC remained in Ireland as many other foreign-owned banks retreated from the market in the wake of the crash.
Meanwhile, the BPFI chief has taken issue with Mr Sibley’s comments that banks are relying on inertia among mortgage borrowers “to enable sizeable differences in interest rates to persist between new customers and different ones”.
The BPFI claims switching has accounted for 12.1 per cent of mortgage drawdowns so far this year and 13.1 per cent in 2018 - the highest levels in a decade and compared to a low of 1.7 per cent in 2013.
In addition, Irish mortgage borrowers moved €1.95 billion of loans in the first nine months of the year to cheaper products offered by their banks, according to European Central Bank data.
Central Bank rules that came into effect in January force banks to spell out savings borrowers can make by switching their mortgages to a cheaper product.