Lenihan rejects FG claims of failure to act on banks

 

Minister for Finance Brian Lenihan has rejected claims by Fine Gael that the Government failed to act on official advice on the banking crisis.

Fine Gael’s finance spokesman Michael Noonan earlier said Taoiseach Brian Cowen, in his former role as minister for finance, had been “asleep on the job” and that he had not made the necessary hard decisions.

It emerged at the weekend that the final piece of written advice given to the Government by outside consultants Merrill Lynch in the run-up to the bank guarantee in September 2008 recommended a €20 billion emergency lending fund and highlighted serious concerns about a blanket guarantee.

Mr Lenihan said the 54 documents, published by the Dáil Committee of Public Accounts, supported the Government’s decision to introduce the guarantee in September 2008.

“Contrary to what Deputy Noonan claims, the documents released indicate that the Government was aware of the turbulence in the international financial markets,” Mr Lenihan said today.

“The documents show the Government and its officials were actively engaged in contingency planning in response to the fast changing financial crisis and alive to its possible implications for the Irish financial system.”

He said the reports on the banking crisis set out that from mid-September onwards the international financial crisis rapidly deteriorated with funding difficulties across both the international and Irish financial systems.

“In those circumstances, the Government introduced the guarantee to respond to this crisis and the introduction of this guarantee has been endorsed by [Central Bank] governor Patrick Honohan in his report on the banking crisis.”

The Minister also noted the report prepared by banking experts Klaus Regling and Max Watson said the £management of the crisis by the Irish Government has been very good”.

Mr Noonan said today the Department of Finance had warned of a possible banking crisis in January 2008, nine months before the Government introduced the blanket guarantee to the banks.

He said the Department advocated that the legal mechanisms should be put in place so that banks could be put into examinership. A month later the Department advised against a global guarantee, Mr Noonan said.

Speaking on RTÉ’s This Week programme, Mr Noonan also said there are documents that show the bank crisis was signalled when Taoiseach Brian Cowen was minister for finance.

He said the Government's excuse that the banking crisis “was bounced on them and they had to act within hours and did the best with the information they had” is not true.

He said Mr Cowen got advice that the issue of examinership should be put in place and it would have required legislation and changes in company law.

He said Department of Finance secretary general David Doyle also indicated at a meeting that he thought a “black hole” was emerging of €8.5 billion in Anglo Irish Bank and €2.5 billion at Irish Nationwide.