Now, Joe's not alone putting this idea about. Yet, the problems at Anglo-Irish and to a lesser extent (so far) at the other banks actually say more about the ability of the state to do its job than it says about the people in charge of the banks. What has the current crisis told us about the people running banks? Well, some of them are incredibly greedy and some of them are incredibly inept and in many cases the two groups overlap.
Okay, maybe it's a bit of a revelation that so many of the people in charge of the banks are inept, but that many are greedy can hardly be an eye-opener for anyone. But, still, the primary revelation is that the state and its agents are incapable of providing the oversight that we as taxpayers, bank customers and investors assumed they were providing. The real crisis is in governance, not in capitalism.
The failure of the state to ensure that our banks were were not taking excessive risks and were operating transparently calls into question the very idea that Ireland can be an independent state with regards to banking and finance. Why this should be so is, I believe, due to the fact that Ireland is just too small.
Ireland is too small to find the people who are willing to get in the faces and ask the hard, searching questions of those who run the banks, to undertake the kind of audit that would uncover both unethical loans to chairmen & directors, but also have the nerve and the authority to lay down the law when they see that a bank is taking excessive risks.
Is Ireland too small to find sufficiently capable people to oversee our banks and financial services industry? Well, maybe it is, but I think there's more to it than that. Ireland is too small in that there are too many links between the people who run the banks and those who are responsible for overseeing the banks.
Some of what I'm getting at was mentioned by Michael Casey before Christmas.
Close relationships between regulators and banks - difficult to avoid in a small country - will have to be ended. It is not being suggested here that the Irish system suffers from "regulatory capture", but the long-standing practice of former governors and senior regulators joining the boards of banks on their retirement should be stopped.But, it's more than that. This is a small country and seeing as the banks and regulators are all based in Dublin, it's even smaller. The bankers may play golf where the regulators play golf, they may have shared friendships, their spouses may know one another, their children may attend the same schools, play in the same rugby clubs, etc. That makes it more difficult for a regulator to come down hard on a banker if it's going to cause tension in the home life. It's just too small, too cozy here.
So, what's to be done? Well, there are two options to try to get around this problem. One, outsource our regulation. Just give up the very idea that we should have our own banks and our own banking oversight. I've often heard that people from abroad wouldn't understand the Irish market the way the locals do, but based on what we're experiencing now that might not be a bad thing.
But, if we must maintain our own banks and regulations, at the very least the central bank and financial regulator need to be moved. They should be sent to Sligo (or wherever) so that the potential for family life inconvenience is mitigated. The regulators can do their job just as well from outside Dublin as they can from here. Move them all, lock, stock & barrel to Sligo or Tralee or wherever it's distant enough so that there's less chance for an overlap among family and friends. We need regulators who are not afraid to regulate.
