Ireland: Misjudging Risk: Causes of the Systemic Banking Crisis in Ireland

The Commission of Investigation into the Banking Sector in Ireland has published its final report. The report, titled Misjudging Risk: Causes of the Systemic Banking Crisis in Ireland, is available here (pdf). The report highlights much, including governance failings at Anglo and INBS, a herd mentality at other banks and difficulties for individual board members of such banks, particularly those without banking experience, to express a view different to the majority view of the board.  One of the main lessons identified by the report goes to the heart of governance: there should exist fora and incentives for leadership and staff to discuss openly and challenge strategy and its implementation. To quote directly from the report: "[it] must become respectable and welcome to express professionally argued contrarian views". With regard to bank directors, the report states:

... the selection of management and board members in ... banks may need even more attention than before. It is the impression of the Commission that long, preferably practical, experience in financial markets has a tendency to promote not only competence but also financial prudence. Banks might do well, in the long run, to ensure that their senior management has, or at least has close access to, extensive lending and risk management expertise; more banking experience in boards would also prove useful. Authorities might also do well to make even greater use of experienced practitioners, domestic and foreign, in various roles".