Cowen 'powerless' over bankers

The Government appeared powerless to stand in the way of the juggernaut of senior bankers, Fine Gael leader Enda Kenny told the Dáil this morning.

Mr Kenny claimed banks had shown utter disrespect to the office of the Taoiseach and turned their noses up at Brian Cowen because he oversaw a light-touch attitude towards regulation during his tenure as minister for finance.

Addressing Mr Cowen during Leaders Questions, Mr Kenny said it was hard to see why public servants would be willing to share the pain in the national interest while bankers received pension top-ups, salary increases and were, in some cases, not pursued to return bonus payments.

In response, Mr Cowen said there had been “systemic failures in relation to the independent regulatory system that we have had” and that he hoped the banking inquiry would address this. He said there had been considerable changes at executive level in the State’s banks and that remuneration and bonus packages had already been tackled.

Mr Kenny said the Government appeared to be "powerless" to deal with a number of senior bankers "for whom no pain is being taken". He said these bankers were conducting business as usual and "thumbing their noses" at the Government. In this context, he asked, "is it not very difficult for ordinary people to understand they’re being asked to take pain in the national interest?”

Mr Kenny noted that Labour Relations Commission chairman Kieran Mulvey told Newstalk this morning that news of the €1.5 million pension top-up awarded to Bank of Ireland chief executive Richie Boucher was creating a negative climate in industrial relations and would make it harder to get the Croke Park deal on pay and reform accepted by public sector unions.

Mr Kenny said it was not encouraging to hear the man who was in effect the bridge between the Government and the trade unions for the deal making such comments.

“Do you not accept that if you don’t act, act swiftly and be seen to act that average ordinary people who have to decide on this bridging mechanism are going to find it very difficult to accept pain in the national interest…when [bankers] are deriving massive benefits they can only aspire to,” he asked Mr Cowen.

Mr Cowen said the Government was acting very positively and proactively to try to fix the banking sector where there had clearly been systematic failures.

“Sometimes I wonder in relation to [Mr Kenny’s] position, whether its about maintaining an atmosphere of total negativity here regarding the economy and its prospects is really your priority rather than trying to deal with the issue because we can do both," he said.

Mr Cowen said the Government took advice from the Attorney General regarding Mr Boucher’s pension and it could not step in and prevent an institution from topping up its pension fund to ensure it can meet its liabilities.

“I hold no brief for any banking executive or bank in these matters,” he said. "Nor am I here to justify it. We all recognise the insensitivity, as regards how ordinary people regard it, and people in the street would regard it in relation to how they view their own particular challenges or difficulties."

Labour leader Eamon Gilmore said many people earning lower wages were outraged at how much former Irish Nationwide chief executive Michael Fingleton had received in salary and bonuses at a time when the bank was run in a “scandalous way”.

“A building society set up to give money to house buyers was instead giving out big buckets of money to about 30 people in a process of rolling enrichment,” he said.

Mr Gilmore said there had for some time been discussion in business circles about the financial strength of Irish Nationwide, which now requires a State bailout of €2.7 billion, and he said he would be surprised if Mr Cowen had not heard these rumours while serving as minister for finance.

Mr Cowen said the system for supervising financial institutions had not worked as well as it might have since the independent regulation system was introduced in 2003.

“I wasn’t responsible for the supervising of financial institutions,” he said. “That was an issue for the independent regulator. At no time did the regulator intimate to me that there were issues [at Irish Nationwide]…”

Mr Gilmore said Irish Nationwide was involved in large scale property speculation and that he did not believe Mr Cowen was unaware of it conduct. He said the Government had tailor made demutualisation legislation which was designed to facilitate Irish Nationwide.

This legislation was highly favourable to Mr Fingleton and his colleagues at the top level of the building society, he said.

"I think that you need to be a lot more frank with the Dáil and the Irish public about the state of your knowledge about the conduct of Nationwide during the period you were minister for finance, because it is not credible."

Mr Cowen said Mr Gilmore was spinning a conspiracy theory and that the demutualisation legislation was not tailor made for any building society.

He also insisted that no issues regarding the regulation of Irish Nationwide had been brought to his attention. "I have nothing to hide in relation to that matter."