Banking Inquiry: John Hurley boxes clever over two rounds

He's no Floyd Mayweather but former Central Bank of Ireland governor John Hurley can bob and weave with the best of them.

Several times yesterday members of the Oireachtas banking inquiry swung at him but he deftly slipped their punches. Some 46 years in the Civil Service had taught him how to handle politicians.

It was a two-round contest over 7½ hours between the committee and Hurley. In the morning the inquiry team focused on his role as the man in charge of financial stability from 2003, when the government hived off its financial regulatory powers, to September 2009, when he retired. In the afternoon it was all about the nuts and bolts of the bank guarantee.

Senator Michael D’Arcy, the lead questioner in the morning, waded straight in in terms of wanting to know where the buck stopped for the failure in regulation pre-crash.

, who was Patrick Neary.

Former colleague

But he didn’t want the committee to think he was blaming his former colleague. Perish the thought. He was merely stating that the financial regulator was in charge of bank regulation.

He also made clear he thought the government’s decision to separate out financial regulation more than a decade ago was a “mistake”.

“The house was divided at a time when the bubble was inflating,” he said.

Hurley’s patch was financial stability. The committee tried, without much success, to ascertain where financial regulation ends and where financial stability begins in the context of an economy where personal indebtedness openly ballooned, the banks’ property concentration rose sharply, and the banks began behaving in ways they had never done before.

Stability reports

Why didn’t it intervene? Hurley’s response was that the risks that were clearly emerging in the system at the time were flagged by the Central Bank in its periodical stability reports.

It also had roundtable meetings with the banks, held press conferences, and passed notes to the government.

That was the height of its intervention even though the terms of the relevant Act suggest that the Central Bank had the power to issue policy directions to the financial regulator. It could merely issue “guidance”, was Hurley’s response.

There was an expression of “regret” but no apology for his part in the events that led to the crash. “The reality is there were functions that we weren’t responsible for,” he said in response to a question from Fianna Fáil’s Michael McGrath.

“We weren’t responsible for interest rates overall, we weren’t responsible for fiscal policy, which was a crucial aspect of the instability, and we weren’t responsible for prudential . . . supervision of banks. We did have an analytical responsibility, a responsibility in relation to financial stability and guidance in relation to financial stability, and we could have done that better.”

That’s putting it mildly.

Some of his answers about the bank guarantee were remarkable. Anglo was illiquid but was not insolvent on the night of the guarantee. If it had been there was no way the Central Bank could have considered giving it emergency liquidity assistance – it had lined up €3 billion, which was never drawn down.

Hurley also told the committee that the Central Bank’s information on the liquidity position of the Irish banks in the months before the guarantee was probably superior to any of its counterparts in Europe.

Hurrah.

Since 2009, the widely held view of Hurley is that he was an ineffective regulator. And that’s putting it mildly.

He boxed clever yesterday but his performance ultimately did little to alter that impression.