Big players 'must admit role in crisis'

INSTITUTIONAL shareholders need to shoulder some of the blame for the collapse of the banking sector, the head of the Irish Association of Investment Managers (IAIM) said yesterday.

Gerry Keenan said institutional investors had paid “a very heavy price for the failures of the Irish banks”, with the value of shareholdings “decimated”, stake dilution inevitable and dividend earnings a thing of the past.

“But be that as it may, institutional shareholders must acknowledge their role in the crisis and the mistakes which they made which contributed to how events unfolded,” he told an economists’ round table on the future of Ireland’s financial services and regulatory structures.

Mr Keenan, who is chairman of the IAIM, the representative body for institutional shareholders, said that “with hindsight it’s clear that we took too much for granted” in relation to the quality of bank directors and the efficacy of regulation that was imposed on the market.

Institutional investors are almost universally the dominant shareholders in listed companies, and one of the few groups with sufficient clout to ensure they have the ear of company management.

“The main fault of institutional investors, in my view, was our failure to properly hold the boards of the financial institutions to account for what they were doing – and for the risks they were incurring,” he told the event, which was hosted by the Association of Compliance Officers in Ireland.