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Ten years on from the Irish banking crisis what has changed?

12th September 2018 – September 2018 marks ten years since the controversial guarantee of the Irish banks by the government, which would lead to the €64m bailout of the banks, and was followed by an unprecedented collapse in property prices, the loss of sovereignty in the form of the 2010 bailout of Ireland by the IMF/ECB/EU ‘Troika’, and deep and prolonged economic recession.

As part of the Behind the Headlines public discussion series, Trinity Long Room Hub Arts and Humanities Research Institute hosted a free public discussion to examine the changes wrought in the Irish financial, business and cultural landscapes by those events and asked: has enough changed in the last 10 years?  Entitled ‘The Banking Crisis – A Decade On’, the discussion featured speakers drawn from the world of politics, banking, journalism and academia.


In his presentation, Simon Carswell, Public Affairs Editor, Irish Times, set the scene for the evening’s discussion and looked back on the biggest public policy decision by a modern Irish government.

“The 2008-2010 financial crisis was the worst in modern Irish history and resulted in the State taking ownership of the majority of the banking system and putting the financial system on life support in the biggest public policy decision by a government in 21st century Ireland. The crisis led to the liquidation of the two most reckless institutions, criminal convictions against unlawful acts uncovered in the wake of the crisis and a change of management at almost all of the other institutions along with new regulations to rein in the excesses of a runaway banking sector.”

However, he said many lessons have not been learned by the banks, and trust in financial institutions has not been regained from the public.

“The tracker mortgage scandal has shown that old habits die hard in Irish banking and financial institutions are still gripped by an ‘us-versus-them’ culture that fails to put the customer first and has left the public still unable to trust the country’s banks. Lingering controversies around banking practices illustrate that regulations may have to extend beyond prudential measures that keep banks on the straight and narrow to make more bankers personally accountable for the actions they take as managers of these institutions to prevent further scandals emerging. Lessons have certainly been learned and important actions taken but more work is required to prevent mistakes being repeated.”

At the event Ed Sibley, Deputy Governor, Prudential Regulation, Central Bank of Ireland, discussed how regulatory reforms since the crisis have increased the resilience of the financial system, while noting that some persistent legacy issues remain.

In his presentation Deputy Governor Sibley traced how a litany of factors contributed to the global financial crisis, leading to an alphabet soup of complex international and domestic regulatory reforms. While acknowledging that these reforms have increased the resilience of the system, he detailed some of the more persistent legacy issues which the Central Bank sees in the financial system, including the findings of its recent work on culture and behaviour. He said that these factors continue to present risk to the system and hamper the rebuilding of public trust.

“Leading up to the onset of the crisis in Ireland, the failings in the banking system resulted in a collective groupthink failure, an excessive build-up of heavily correlated risks, and a disregard for customers. A fundamental protection for consumers lies in ensuring the financial system is stable and the firms that operate within it are financially safe and sound.”

 

Antonia Hart, a PhD candidate in Trinity’s School of Histories and Humanities took the audience back to nineteenth century Ireland, when famine had ravaged the country and where credit played a central role in ordinary people’s lives, and was necessary in order to purchase basic goods.

“Credit cards, mortgages, car loans – they seem so much like products of the way we live our twenty-first century lives. But credit and debt have always been with us.”

Discussing the prevalence of pawnbrokers at the time, Antonia highlighted how the greed of the industry, which was later the subject of various investigations, may have exacerbated people’s experience of the famine.

“Credit was usual for getting your daily goods. But you couldn’t get everything on credit, and if you weren’t in a position to settle up at the agreed intervals credit might be denied you in future. There was always a need for cash, and the easiest way to produce cash at short notice was the pawnbroker’s shop, a place where, unlike a bank, it didn’t matter that you were a woman, or poor, or otherwise marginalised. There was no credit check, almost no paperwork, and you could walk out in a matter of minutes with cash in your pocket. But of course the interest payments became a regular burden, and what was intended as a rapid response to a condition of precarity very often ended up being a contributor to that condition of precarity.”

Addressing the banking crisis discussion, Joan Burton TD, Labour Party spokesperson on Finance from 2002 to 2011, highlighted the political landscape at the time of the crisis and the boom to bust policies that resulted in the crash with horrific consequences for Irish people, society and economy and ‘330,000’ people losing their jobs.

“In many ways in terms of the era we’re talking about it was the best of times and the worst of times. If you look at the period from roughly 2002 up to 2007 when we came to the height of the boom, for a lot of people it was and it felt like the best of times. But when you come to the crash in 2008 up until 2012 when the first signs of recovery really began, it was probably for many people in Ireland one of the most difficult periods, hopefully, they would ever experience in their lives.”

Ms Burton said tax laws ‘threw money’ at people who invested in property, land and construction, with developers’ helicopters ‘buzzing over race meetings’ and individuals becoming property spectators.

 

Watch the discussion here


Behind the Headlines series is supported by the John Pollard Foundation.

About the speakers:

Ed Sibley, Deputy Governor, Prudential Regulation, Central Bank of Ireland
Ed Sibley was appointed Deputy Governor, Prudential Regulation on 1 September 2017. He is an ex-officio Member of the Central Bank Commission and is also a member of the Supervisory Board of the Single Supervisory Mechanism (SSM). As Deputy Governor, Prudential Regulation, Ed is responsible for leading the supervision of credit institutions, insurance firms and the asset management industry.

Joan Burton TD
Joan Burton is now on her fifth term as Labour Party TD for Dublin West.  She was the Labour Party spokesperson on Finance from 2002 to 2011 and was elected Deputy Leader in 2007. In September 2008 she was a major critic of the bank guarantee and the subsequent legislation.  Deputy Burton served as Tánaiste and leader of the Labour Party from 2014 to 2016 and has held a number of ministerial roles, most recently as Minister for Social Protection from 2011 to 2016.   In the current Dáil she is again Labour’s Finance spokesperson and she serves on the Budget Oversight Committee.

Simon Carswell, Irish Times correspondent
As Finance Correspondent for the Irish Times, Simon Carswell covered the banking crisis from 2007 to 2012; this work earned him the National Journalist of the Year award from the National Newspapers of Ireland in 2011.   He is the author of two books: Something Rotten: Irish Banking Scandals (2006) and Anglo Republic: Inside the Bank That Broke Ireland (2011).   He was the Irish Times Washington Correspondent from 2013 to 2017 and is a regular contributor to radio and television.

Antonia Hart, a PhD candidate in Trinity’s School of Histories and Humanities
Writer Antonia Hart’s current research Irish Women in Business, 1850-1922 funded by an Irish Research Council Government of Ireland Postgraduate Scholarship 2016-2019, looks at Irish women running businesses in the period just after the Famine up to the foundation of the State. Her fiction, non-fiction and short memoir pieces have been published in magazines and anthologies, and she is the author of Ghost Signs of Dublin (2014).

Dr Philip Coleman, Associate Professor in Trinity’s School of English
Philip Coleman is a specialist in American literature with a particular interest in twentieth-century and contemporary poetry and short fiction. He is also Trinity’s Registrar of Chambers, an annual officer appointed by the Provost to allocate campus rooms to students.

The Trinity Long Room Hub Behind the Headlines series is supported by the John Pollard Foundation.
Register here  

About the 'Behind the Headlines' Series

The ‘Behind the Headlines’ discussion series hosted by Trinity Long Room Hub Arts and Humanities Research Institute offers background analyses of current issues from experts from the fields of arts and humanities research. It aims to provide a forum that deepens understanding, combats simplification and polarisation, creating a space for informed and respectful public discourse. The series is supported by the John Pollard Foundation.

See #HubMatters https://www.tcd.ie/trinitylongroomhub/whats-on/details/behind-the-headlines.php

 


Press

The Times - 13 September 2018
Central Bank boss warns of financial crisis repeat
by John Walsh

Read the full article here

RTE - 13 September 2018
Effects of financial crisis still being felt by too many - Central Bank's Sibley


Read the full article here

The Irish Times- 13 September 2018
Central Bank backs ‘legitimate and necessary’ sale of bad loans
by Joe Brennan

Read the full article here

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