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Serious and practical measures are needed to address the root causes of the banking crisis – Tóibín

29 January, 2016

Sinn Féin TD and junior spokesperson for Finance spoke after the publication of the Report of the Joint Committee of Inquiry into the Banking Crisis. The deputy stated that the ‘absolute paucity of vision is staggering’ in the proposed training measures recommended in the wake of the banking collapse, he went on to ask “On what planet can these issues be resolved with a PowerPoint presentation and a certificate?”

The Meath West TD said:

“The recommendations of this report are not serious in tackling the root causes of the crisis.

“While the report correctly cites that the practices of senior executive management and boards of directors were responsible for the state intervention, its solution is to simply introduce professional development courses for appropriate to banking, risk and governance.

“The root causes of this will not be solved with a training course. The absolute paucity of vision here is staggering. This crisis was caused by a vicious circle of reckless property speculation by developers.

“This was facilitated by unsustainable lending by banks that were poorly policed by a financial regulator that was intentionally created with insufficient powers and resources by a political class that was itself beholden to developers.

“The abandonment of prudential lending practices by banks’ senior executives was reinforced by board-level groupthink. This fuelled a ‘race-to-bottom’ mentality in terms of pressure to match the unsustainable terms offered by competitors.

“The pursuit of reckless lending was justified by the requirement to maximise shareholder value - even though this was not in the medium- to long-term interest of the business.

“There was a change in culture of banking away from service to customers and towards meeting arbitrary ‘sales’ targets. This culture change was reinforced by a shift in balance between basic pay and performance-related pay/bonuses within salary structures.

“On what planet can these issues be resolved with a PowerPoint presentation and a certificate? There is a need for serious and practical measures to be implemented.

“Banking boards need to act in the long-term interest of the bank rather than pursuing the short-term maximisation of share-holder value. There is a need to expand representation on bank boards such as from community representatives and employee representatives.

“This would reflect the need to recognise the broader and social role of financial institutions - as opposed to their purely commercial role. The Regulator should lead a major review of culture of banking which would include consideration of how the structure of remuneration within financial services sector affects service to customers.

“If this government was serious about reforming the banking sector, it would legislate for banks to act in the interests of both the long-term objectives of the institution as well as the long-term interests of the communities those banks are there to serve.” 

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