Madam, – Colm McCarthy has suggested a possible Government inquiry into why the banks “failed” (Home News, August 18th). In order to save time and cost to the taxpayer, I suggest he look at the 2007 Central Bank Stability Report which highlights that lending for construction and real estate grew from €5.5 billion in 1999 to €96.2 billion in 2007 – an increase of 1,730 per cent or €90.7 billion over eight years.
In the same period total lending grew by €120 billion, implying that lending to all other sectors of the economy grew by less than €30 billion. Assuming that the banks report quarterly to the Central Bank/Financial Regulator, the explosion in property-related lending (the lion’s share of which related to the “real estate” rather than “construction” category) equates to 54 per cent per quarter. The disproportionate growth in such lending was both at odds with stated economic policy and sound risk management.
It is inconceivable to think that such growth went unnoticed. I would respectfully suggest that this statistic alone clearly demonstrates the abject failure of the Financial Regulatory regime and the probable complicity of others. Such concentration of risk is a basic risk management error. That it was allowed to grow to a magnitude that threatens the economic health of the country for a generation is unforgiveable.
Based on the above, the question is not how did it happen, but who allowed it to happen? – Yours, etc,