Crash was an ‘iceberg I didn’t see’, says former financial regulator

The banking crash of late 2008 was like an iceberg waiting to be hit, the former financial regulator Liam O'Reilly has said.

Mr O'Reilly, who served as chief executive of the Financial Regulator from its establishment in 2003 until January 2006, told the Oireachtas banking inquiry he felt the regulator was in good shape when he retired but accepted now this was not the case.

“There was a lot of work in putting together an organisation, unifying that organisation and making sure that it worked cohesively,” he said.

“I felt I had done a good job in that area. When I left the regulator, I thought I left it in a good state. Obviously, in hindsight, the issues were just an iceberg that I didn’t see.”

He accepted the regulator should have adopted a more aggressive and intrusive policy during his term. “However this would have required more resources,” he said.

Shortcomings

He accepts now that the principles-based approach to regulation during his time had “major shortcomings”.

“The Financial Regulator can no longer place the same degree of trust which had previously existed in the boards and senior managements of banks,” he said.

“In future, the Financial Regulator must adopt a more intrusive and aggressive approach. Moreover, the regulatory system did not appreciate the full extent of the credit exposures. I deeply regret that these failings in the system were not recognised during my tenure in office.”