Banks should have assessed own risks, says ex-regulator Patrick Neary
Former financial regulator Patrick Neary has said the banks had a primary role in the financial crisis.
Mr Neary told the Banking Inquiry that banks were "best-placed of all to assess their own risks and business models" and "primary responsibility resided with the banks themselves".
He also suggested that it was the Central Bank's role to monitor and assess risks.
The Financial Regulatory Authority was obliged to follow these forecasts which predicted a soft landing.
"If that prediction had been fulfilled, there would not have been a banking crisis," he stressed.
Mr Neary, who received a €630,000 pay-off in 2009 and has an annual pension of €114,000, also defended his payments.
He said it was a civil service grade, "the same as the Director General of the Central Bank and 5pc less than the Secretary General of the Department of Finance".
Asked by TD John Paul Phelan if his severance pay was "appropriate", Mr Neary said it was what the authority "agreed to provide" him with.
"I really have no more to say about that," he added.
Mr Neary explained to the meeting that the Financial Regulator was not a single individual but an authority.
That authority did not have the mix of skills necessary for a more intrusive style of supervision. They had too few staff who were stretched to the limit.
Mr Neary agreed with Fianna Fail TD Michael McGrath that the banks had lent too much money to the property sector.
He also agreed that the authority had an opportunity to set "really hard, well-defined limits" on some of the riskier sections but they did not.
He "agreed to differ" when asked about his supervision being "deferential" to the banks.
"The authority took the view that a principle-led regime was appropriate and it clearly did not deliver the required outcome," Mr Neary said.
He had bought into this, but with hindsight a far more intrusive regime would have been better.
Sinn Fein's Pearse Doherty questioned Mr Neary about the concentration of loans where 20 customers of Anglo Irish Bank and 25 at Irish Nationwide Bank had half of all loans, and why he had not intervened.
Mr Neary said he "could not conceive of a situation that the regulator would intervene in a contract between a bank and a client".
It was only in the context of the performance of the loan that the regulator got involved if the loan became non- performing.
Socialist TD Joe Higgins asked him about "cosy" relationships with bankers, why the regulator should trust bankers and if he was out of his depth.
"The reality of it is the system failed. I have to recognise and accept that," Mr Neary said.