Senior management at the Central Bank “toned down” warnings in the bank’s annual report on financial stability, and were unwilling to countenance any mention of property prices being overvalued, according to evidence presented to the banking inquiry.
Frank Browne, head of financial stability at the bank from 2003 to 2010 said in a witness statement said “ tight editorial control” was exercised , particularly in 2007, when the assessment was altered to remove warnings about the property bubble.
Senior management “ was informed and should have been aware” of the dangerous situation that was emerging in terms of a property bubble, the statement says. However they failed to have proper regard to what was happening. If they had acted earlier some of the cost of the crisis could have been avoided, according to Browne.
Browne’s statement was published yesterday by the inquiry, along with a number of statements from other witnesses taking issue with what he said. Former Central Bank governor John Hurley said he stood by his earlier statement that he was not aware of contrarian views within the bank which differed significantly from its public reports. He said Mr Browne did not speak up at meetings in which the reports were finalised to express any disagreement.
Mr Liam Barron, director general of the bank from 2000 to 2007, said he wanted to “categorically refute Frank Browne’s central narrative which alleges senior management of the bank were warned about the problems, including the property bubble, in the pre-crisis period... and ignored these warnings”.
He added: This is a grave accusation and appears to have the effect of protecting his own reputation while questioning the reputations of others, all now in retirement.”
Mr Browne’s statement, published after a lengthy period of consideration by the committee, alleges that senior management actively toned down negative commentary.
The control exercised on the annual reports after 2004 “meant that it was nigh impossible to have any mention of misalignments or bubbles in property prices appear in the executive summary” of the annual review. Mr Browne’s statement refers to minutes of meetings which illustrate “the unwillingness” of senior management to have any negative reference to house prices.
“Indeed, when all the indicators, at least with respect to house prices, began pointing simultaneously in the same dangerous direction, the response of senior management was to suppress or dilute the information.”
Mr Browne said that he believed that the then governor, John Hurley, and senior management did not have much of a sense of the real importance of financial stability. Research and analysis conducted was ignored, he said.
The governor told him [Browne] that he did not agree with his views on financial stability, Mr Browne says, and there was at least three attempts where there were efforts made by senior management “ to quash any attempts at expressing my views on the sources of financial instability.”
At one stage Mr Browne was accused of having “ political” views, his statement says.
On one occasion governor Hurley told Mr Browne in front of 10 staff “ that he did not want to hear any more of what I was saying,” Mr Browne’s statement says.
In addition to Mr Hurley and Mr Browne, a number of other former Central Bank staff took issue with Mr Browne’s statement,which was forwarded to them by the inquiry to allow them to respond. Among them, Tony Grimes, who succeeded Barron as director general, accuses Browne of making “ numerous errors of fact”, as well as of interpretation.
