Patrick Honohan told to ‘dream on’ about banker prosecutions

‘There will be another crisis, that’s for sure,’ says former Central Bank governor

The criminal convictions that followed from the banking crisis were not directly related to the reckless behaviour that led to the banks needing State support, former governor of the Central Bank Patrick Honohan has said.

In the wake of the crisis he had the “common sense view” that some of the reckless behaviour of bankers had to be a criminal offence under the common law system, but he was told to “dream on” and that there was not sufficient case law to support such prosecutions.

Prof Honohan was speaking prior to the launch on Tuesday of a major report from the Law Reform Commission which, among other matters, considers his view that the law should be able to address what he described in 2015 as "egregiously reckless risk-taking" by senior bankers.

In the report, the commission recommends that the fraud law be changed so that it covers egregiously reckless risk-taking by business, but has come down against the introduction of a new law of reckless trading least it introduce a “chilling effect” on legitimate entrepreneurial risk-taking.


Mr Honohan said the convictions that have taken place arising out of the banking crisis were all concerned with “misdeeds” that occurred during the panic that took hold as the crisis erupted.

During the years leading up to their collapse, the banks lent huge amounts of money to the booming property sector, which was lost when the property market imploded.

False steps

Mr Honohan said that while it was easy to identify the false steps that some bankers took near the very end, it was the sequence of decisions taken over the years about risk appetite that led to the State bailout.

The individual impact of any one of these decisions was hard to pin down and therefore harder to prosecute.

However he still wondered whether the general principles of common law could have been used to support further criminal charges.

He said many senior bankers were led to believe they were operating in a “new world of sophisticated risk management”, so he would not accuse them all of criminal recklessness. “But there were some that you could point the finger at.”

Few banks anywhere had lost as high a proportion of their total assets as did some of the Irish banks.

White-collar crime

He often thought that the legal system did contain implicit powers to bring certain cases. “I was inclined to say, let’s go ahead with the powers that we have.”

If new powers are to be introduced then this has to be done “very carefully”, as the danger with introducing new specified powers is that they might reduce the implicit powers that already exist.

The law as it operates gives huge protection to the individual and this makes it difficult for the State to get convictions for certain types of white-collar crime.

It can also make for very lengthy procedures when the State and its agencies are trying to hold people to account.

“The general public may assume that no one is serious about this and that the authorities are just spinning it out, which is not the case at all.”

With certain types of crime, the way in which the individual is protected can lead to processes that “just don’t work”.

He said he hoped that the Law Reform Commission report would provide answers to some of the questions that had arisen.

“There will be another crisis, that’s for sure. And it may not be in banking.”

Colm Keena

Colm Keena

Colm Keena is an Irish Times journalist. He was previously legal-affairs correspondent and public-affairs correspondent