After repeatedly ruling out the idea that a banking inquiry would occur in the near future, the government has now released its own proposals for exactly such an inquiry. The formal proposals are here (this is an amendment to Labour’s proposal) while the Minister for Finance’s speech on the issue is here.
The essence of the proposals are as follows:
The inquiry will have two stages.
First, the Government will immediately commission two separate reports – one from the Governor of the Central Bank on the performance of the functions of the Central Bank and the Financial Regulator and the second 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. I expect both reports to be completed by the end of May this year and laid before the Houses 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. 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.
A couple of initial observations. First, as I understand it, it seems unlikely that the second stage will involve any public hearings. The Commissions of Investigations Act of 2004 (link here) states that:
A commission shall conduct its investigation in private unless (a) a witness requests that all or part of his or her evidence be heard in public and the commission grants the request, or (b) the commission is satisfied that it is desirable in the interests of both the investigation and fair procedures to hear all or part of the evidence of a witness in public.
Neither (a) or (b) seem too likely to occur.
Second, to my mind, the request that the Governor of the Central Bank be charged with writing the definitive report on its past performance puts Patrick Honohan in an invidious position in light of the fact that he will have to work on a daily basis with many of the staff who remain on from the previous regime.
Third, the terms of reference only go up to events up to September 2008. I would prefer to see the date extended at least up to early 2009 as there are serious questions to be asked about the Regulator and Department of Finance’s understanding of the scale of the problem facing our banks and the advice they received from outside sources such as PWC (see here and here).