The Government has proposed a statutory commission of investigation into the "systemic" failures in the banking system, to be established by the end of June and completed within six months.
Minister for Finance Brian Lenihan told the Dáil the Government will immediately commission two separate reports.
One will be sought from the Governor of the Central Bank on the performance of the functions of the Central Bank and the Financial Regulator, and the second report will be sought from "an independent 'wise' man or woman with relevant expertise to conduct a preliminary investigation into the recent crisis in our banking system and to inform the future management and regulation of the sector".
"These reports will also consider the international, social and macro-economic policy environment which provided the context for the recent crisis," Mr Lenihan said. He said he expected both reports to be completed by the end of May and laid before the Houses of the Oireachtas shortly thereafter.
The second stage of the inquiry will be the establishment of a statutory commission of investigation which will be chaired by a "recognised expert or experts of high standing and reputation".
Mr Lenihan said the terms of reference for this commission will be informed by the conclusions of the two preliminary reports.
"The aim will be for the commission to complete its work by the end of this year. Its report will then be laid before the Oireachtas for further consideration and action by an appropriate Oireachtas committee."
Mr Lenihan said the commission would examine and report on "the causes of the systemic failures such as corporate strategy, governance and risk management in the Irish banking sector". There were a number "broad themes" to be examined, including:
- The performance of individual banks and bank directors where wrongdoing and lax practices have contributed considerably to the crisis;
- the performance and structure of the banking system generally;
- the performance of the regulatory and Central Bank systems;
- and the response of the relevant Government Departments and agencies, including the linkage between the banking crisis and overall economic management.
Mr Lenihan said that over the next number of months, "a significant amount of work" needed to be completed in order to return the banking system to health, including the first stage of the "critical" transfer of assets to the National Asset Management Agency.
The Minister said, however, the banking system was "still fragile".
"We are not out of the woods yet."
The Labour Party put down a private members’ motion on the issue to be debated tonight while the Government’s plans are outlined in an amendment to the motion that was published this afternoon.
Labour Party deputy leader and finance spokeswoman Joan Burton said the Government was wrong to deny the country a "proper and open" banking inquiry.
She said if there was a plane crash or a major natural disaster, such an inquiry would automatically follow. She said it was "dictatorships" that refused to have open inquiries and instead held "closed" inquiries seeking "simple and trite explanations".
Sinn Féin's Arthur Morgan said the inquiry was "a whitewash" before it even starts.
During earlier exchanges in the Dáil, Fine Gael leader Enda Kenny also said the proposal “looks like a whitewash” and claimed it was “designed to protect insiders”.
Mr Kenny said the inquiry’s remit makes no mention of the Government’s own role in the crisis. “The establishment of the kind of commission being proposed by the Government would amount to a secretive whitewash which would not be in the interests of public transparency and public accountability,” he said.
Mr Kenny accused the Taoiseach of being afraid to hold the type of inquiry demanded by the public because of the “regulatory reforms and lax positions” adopted by the Government prior to the financial collapse. “The public will perceive this as a self-protection racket,” he claimed.
Taoiseach Brian Cowen defended the Government’s plan, maintaining a statutory commission of investigation was a “tried and tested” mode of investigation.
Mr Cowen said it is the view of the Government that a commission would be a timely and cost-effective way to investigate “the background and causes of what has occurred and learn whatever lessons had to be learned for the future.”
Labour leader Eamon Gilmore said the Government’s amendment to his party’s motion was “cleverly designed” to keep the inquiry private and to exclude political accountability.
Mr Gilmore described the Government’s proposed inquiry as “totally deficient”. He said the remit of the inquiry only went up to 2008, which he claimed, was specifically intended to avoid the period leading up to the Government's deposit guarantee scheme.
He said the Government was attempting to replace an accountable, public inquiry with a “privately conducted, behind closed doors, three or four stage exercise that will be dragged out until the Government gets to the other side of a general election”.
But Mr Cowen insisted the benefit of commission of investigation approach was that it provided “tribunal-like powers without tribunal-like costs”, and would report within a shorter time span.
He said the inquiry would seek to investigate “the structures and processes” which led to the collapse.