Want to make bank chiefs act, Paschal? Then shame them!
THE making or breaking of a government is sometimes determined by how it responds to a crisis. In fairness, the present Government performed well up to, during, and – so far – after Storm Ophelia.
Ministers were falling over themselves to communicate both a warning and a reassuring message to the general public. There is nothing better, from a PR point of view, to have known meteorological celebrities fronting live crisis meetings, with a fawning minister or two in the same shot.
Political history in this regard is littered with examples of dos and don’ts when dealing with a crisis which comes out of leftfield. For instance, in France in 2003, during an unprecedented countrywide heatwave, more than 3,000 people died from heat-related causes, while the relevant ministers were declaring on the public airwaves: ‘Pas de probleme.’ That government, and some of its ministers, never recovered from being caught sleeping at the wheel.
In 2001, the government in which I was a minister was hit by a crisis of monumental proportions – footand-mouth disease. We immediately held daily crisis meetings made up of relevant Cabinet ministers and public officials and devised measures to deal with the situation. One of the key elements of this was communication with the wider public in order to explain why the restrictive measures were required. It is fair to say that, politically, that government got huge kudos for the way it handled the crisis.
Taoiseach Leo Varadkar and his ministers were seen to take control of the situation from the start. I would suggest that they do not bask in the favourable afterglow, because, ultimately, their star will rise or fall depending on what extra resources they provide to the local authorities and other agencies in the affected areas.
AN area where this Government has been behind the curve is in relation to the tracker mortgage issue. They had plenty of forewarning about this issue. This paper and others have highlighted this scandal for the last number of years. But it is only this week, with the Central Bank coming before the Oireachtas Finance Committee, chaired by John McGuinness, that we are learning more details as to how the banks have behaved poorly on this issue. It now transpires that possibly up to 30,000 account-holders have been affected and that only 33% of those who wrongly faced higher mortgage charges have been compensated. But more alarmingly, we learned that the regulator is relatively powerless, at least in the short term, to force the banks to cure this awful situation once and for all.
This is despite the lessons learned from the ineffective regulation of our banks during the banking crisis. Labour leader Brendan Howlin stated that, after the banking crisis, stronger regulation laws were brought in, and that now it was time to use them. And yet, Philip Lane, governor of the Central Bank, suggested that it was better to use persuasion on the banks, to do the decent thing by the affected mortgage holders on a voluntary basis.
He did not think going down the legal route was the answer. And we learn that the same Central Bank gave the banks an extension of 12 months to a deadline to come up with a figure of how many customers were affected.
Sometimes, in relation to a political problem, there are more ways than one to skin a cat. The Government can look to other means to get the result they want.
For instance, more than anything, banks hate when their bottom line, financially, is affected. A declaration by the Government that they intend to bring in a levy against the banking sector would, in my view, bring them to heel very quickly.
This week, they hinted that they might do this. If they do, it will be one of the few times when all sides of the House will agree. They could also use other measures to pressurise for results. A tactic I regularly used in different ministries was to make the leading figures involved do the ‘walk of shame’.
I would publicly invite the leading personalities into my office, while, at the same time, making sure through my press office that every media organ had a camera at the ready, as they were about to enter the building. Most of the people involved hated this exposure.
I used this device on a number of occasions; for instance, when dealing with a crisis in An Post. I also called in the US ambassador over a suspected extraordinary rendition through one of our airports. And, indeed, I called the top bank executives into my office, when I was in Justice, after I learned that they made very little use of bugging devices in the fight against tiger kidnapping and ATM raids, which were very frequent at the time.
On each occasion, those involved had to run the gauntlet in order to reach me. I always found that they tended to be much more amenable once they got into the comfort of my office.
EQUALLY, I wonder when we are going to witness the top executives of the banks walking in the gates of Leinster House to go before an Oireachtas Committee. We will probably be told these committees do not have the power to compel the banks to attend. But surely they can use the same type of moral pressure as the Central Bank claims it is using in its dealings with them?
Minister for Finance Paschal Donohoe announced that he was calling the banks in to a meeting next week where they will be ‘admonished’ for their behaviour, according to the Taoiseach. Tough talking, one would think. But, on Thursday, we learned that the banks are meeting the Minister for Finance on two different dates, next Monday and Wednesday! I might be wrong, but this suggests to me that some of the banks are dictating to the minister what day he should meet them.
I wonder is the reason for having two separate meetings something to do with the fact that some banks have responded reasonably well when dealing with this issue, while others have not.
Perception is very important in politics. I would strongly suggest to the Finance Minister that he insist they all come in together to a meeting in his office, at the same time and on the same day; that they come in the front door, and that the cameras are on standby outside to record the event!
This country suffered greatly because of the deferential treatment previously shown by the independent watchdog towards the banks. We must not let it happen again.