We've been fed the line for some time that the principle reason Irish banks collapsed in 2008 was due to lax financial regulation by the Irish authorities. This has been the main justification for the foisting on the Irish tax payer of the massive losses incurred by the financial sector here.
Cormac Butler, writing in yesterday's IT begs to differ. In 2005, the EU implemented a directive based on the IFRS (International Financial Reporting Standards) which compels banks to hide losses on distressed loans until they are realised. You read that right; it doesn't just allow them to do this - it forces them. And it seems that the only central bank that sees a problem with this is the Bank of England which has issued proposals to resolve the issue.
A group of British-based pension funds is pushing to have this directive reversed and has contacted the relevant commissioner, Michel Barnier. It has warned him that the process by which the EU allows the concealment of these losses is contrary to EU company law and hopes for some progress on this issue under the Irish presidency. Those who framed the rules 7-8 years ago now admit that they were "overly complicated, rushed together in an inelegant manner and are not fully understood by anyone".
In 2008, our then finance minister Brian Lenihan was told that Irish banks were solvent. Lenihan was almost certainly not aware that the report reassuring him on this point concealed huge losses, owing to loopholes that the EU had created.
If the Bank of England’s proposals are taken on board, the EU may be forced to acknowledge that its contribution to the banking collapse here is rather more than it has hitherto admitted.
Bank regulation a worry for Ireland's legacy debt negotiations - The Irish Times - Fri, Jan 04, 2013