Thanks to Karl for the link to the transcript of Mr. Elderfield’s appearance before the Oireachtas Committee in the post below. There is clearly a great deal that is of interest in the transcript, and it might be useful to develop some separate threads.
One part of the transcript worth highlighting is Mr Elderfield’s responses to questions on the need for a resolution regime. These responses came in exchanges with Deputies O’Donnell and Varadkar. I have included the relevant extracts after the break.
It is encouraging to see Mr. Elderfield engaging with the resolution regime question. It is also hard to argue with his portrayal of the complexity of the issue, and with the legal challenges in particular. While we must sympathise with how much he has had to deal with since taking the job, I am still struck by the lack of urgency he appears to give to the need for a resolution regime to limit the extent of the creditor bailout.
Mr. Elderfield is understandably taking a forward-looking approach, and is concentrating on putting in place a regulatory regime that limits systemic risk, including consequent future liabilities to the exchequer. This is indeed essential. Maybe I am naive, but I think the risk of Irish banks engaging in reckless lending in the near term is low. How we allocate the losses associated with the reckless lending of the past is still a live issue, however, and should be higher on the list of Mr. Elderfield’s priorities. We should be focused on how we can draw on international best practice to have a regime ready for when the guarantee expires so that losses can be fairly shared with long-maturity investors. It is as if we are out in the workshop building a state-of-the-art new door, all the while the horses are still bolting.