Address by Governor Patrick Honohan to Institute of Certified Public Accountants in Ireland Post author By Philip Lane Post date October 28, 2010 His speech is here. Categories In Banking Crisis, Fiscal Policy Tags Honohan speech 4 Comments on Address by Governor Patrick Honohan to Institute of Certified Public Accountants in Ireland ← Ireland’s Experience in the Bond Markets → McDonald and Cuffe on Metro North 4 replies on “Address by Governor Patrick Honohan to Institute of Certified Public Accountants in Ireland” It all looks like so much wisdom and knowledge in hindsight. But this knowledge and wisdom existed prior to the blowout. The irony is that, if the Governor and others with similar capability and knowledge had gone public – and done so forcefully – prior to the event, their reputations and integrity would have been traduced by the Powers That Be. Most certainly he would not be in the exalted position he now enjoys; and that would be Ireland’s loss. With the country facing a gut-wrenching programme of fiscal adjustment there is an urgent requirement for the Oireachtas to have access to an independent, credible, evidence-based body of analysis and advice so as to exert proper scrutiny and restraint over the plans advanced by Government. We have to start with what we’ve got and my proposal is to split the ESRI into two, completely separate, parts; the first pursues the ESRI’s original remit, let’s call it “core ESRI”, while the second operates similarly to a conventional consulting firm. The resources of core ESRI should be increased allowing it to drill down into the various economic sectors so as to inform its macroeconomic analysis to provide the kind of analysis and advice the Oireachtas badly requires. It’s no use berating the opposition factions for failing to answer comprehensively the question “well, what would you do?”. They do not have the data and resources available to government. But these should be made available to the Oireachtas – and to core ESRI operating as its economic and social research arm. This is the minimum the Irish people require. All the rest is merely ineffectual commentary and speculation amid special pleading by vested interests. The accounting profession didn’t cover itself in glory during the boom years either. There are many professions who let the public down while their members were feeding at the trough. @All ‘Anything that is unsustainable will stop.’ Great line that! Not a very impressive speech. It seems its main point is the the SGP pact is inadequate in forecasting problems. Indeed. That is why we employ well paid central bank officials. The most alarming piece to me is the following: “At this point, it became clear that a long-drawn out drip-feed process of NAMA tranche announcements based on each successive size-tranche was in prospect. In order to avoid this, NAMA agreed to conduct a sample review of the full range of tranches. The resulting estimated all-tranche NAMA haircut for each bank was the basis of the end-September 2010 announcement which led to an increase in the required capital of Allied Irish Banks (AIB), and to confirming the judgment that AIB would not be able to raise all of the needed capital from the market.” So the final figure was based on a NAMA sample review of all tranches. And if they are wrong? He could have asked a few simple questions. How many of the bank auditors were trained in banking economics? How many of the bank finance team were trained in banking economics? Why did auditors not pick up on the risk of concentration of loans? Why did neither banks not auditors consider reserves by industry sector? Why did the ECB not insist on higher reserves based on disproportionate sectoral lending? On a positive note the charts did illustrate that our parents generation were much more alive to the nesessity of living within their means (1960-1970 period in charts). Comments are closed.