In Friday’s testimony before the Oireachtas Committee, Patrick Honohan encapsulated the European option that might have been pursued in September 2008:
Professor Patrick Honohan: I draw the attention of members to the report I prepared in May 2010, which lays out in considerable detail, though perhaps in not in headline grabbing language, the regulatory experience and the policy on regulation and financial stability in the Central Bank and the Financial Regulator’s office in the years running up to the crisis and the night of the guarantee. It lays out what the people thought, what preparatory work they had done, the way in which the banks were supervised, the style and approach adopted then and the quality of the information. Information was not of high quality, which led to the situation in September 2008 when neither the Central Bank nor the Regulator had anything like enough information about the condition of the banks and, furthermore, to a large extent, they did not realise the degree to which they did not have the information. They did not realise, therefore, the risks that were involved and the huge risks being presented by the policy action.
The Senator has put his finger on an important point. The decision taken at that time was to say “We are a triple A rated country; we can take this on our books no problem with everything guaranteed”. The decision could have been to say, “This is quite a big and unknown risk; it may be too big to take on our books. We need to get the European tie in”, which would not have been easy. We know that the message from Europe at that time was that everybody had to solve their own banking issues because each country had problems. However, our problems were much larger proportionately than those in any other eurozone state. If that had been brought to the European table with an acknowledgement and a sharing of the risks involved, we would not be in the position we are today. The information was not there and the decisions taken by the Government at the time were based on a quality of information that should have been better.