Public believe banks have yet to atone for the past.
It is just over a decade since the ‘bailout’ of the Irish banking sector began in earnest in March 2009. Even now over a billion euro of public funds is required to service the annual cost of bank recapitalisation and subsequent public sector borrowings. For thousands of individuals the fallout from the financial crisis has included spiralling debt, court appearances, broken relationships, and worse. And of course the political consequences of the crisis are still unfolding. The Dáil is one of the one of the most fragmented parliamentary chambers in Europe with a large number of independent members, including some in government.
The issue of pay and bonuses within those banks that received state assistance after the 2008 crash has recently re-emerged in the public arena. The outgoing Governor of the Central Bank of Ireland recently told Minister for Finance Paschal Donohoe that that institution was now open to the idea of removing barriers to bonus awards within Irish banks introduced following the financial crisis. Several banks have been pushing for relaxation of what they consider to be commercially damaging restrictions for some time, expressing particular concern about staff retention and capacity to compete for recruitment of top executives from within as well as from outside the banking sector. British bank relocations arising from Brexit are also now invoked as part of the argument to facilitate higher remuneration by way of bonuses, even if a core pay cap of half a million euros remains in place for some banks.
Unsurprisingly, public attitudes to the banking sector in Ireland since 2008 reflect very high levels of distrust and cynicism. A report by the Central Bank of Ireland last year strongly criticised the failure of the banks’ to address this. However, the recent launch of the Irish Banking Culture Board (IBCB), funded by the five main retail banks, suggests the industry may be finally awakening to its responsibilities. For its part the government is seeking to introduce legislation to make senior bankers more directly accountable for their actions.
Questions have been raised about the independence of the IBCB given it is funded by the banks, and also its governance model which is very representative of the industry. However the Board is not the first industry-sponsored body in Ireland. The Press Council of Ireland was created in 2007 under government pressure for newspapers to self-regulate or else face statutory regulation. Its autonomy and authority have not been fundamentally challenged in the years since.
Choosing to put ‘culture’ in the title is an unusual step. The nomenclature raises obvious questions, including how to determine what is the existing culture, can it be changed and how, and who will determine such change? And is the Board itself to exist in perpetuity or is there a sunset provision for its cessation?
Modern day financial institutions operate in a number of different cultural contexts. As well as their individual market brands and proposed ethos (banks sought to differentiate themselves from competitors during the Oireachtas banking inquiry), each will have their own internal organisational cultures and values that may be difficult for outsiders to understand let alone change. And there is a wider European and international banking cultural context within which Irish banks must operate, a point they have been keen to emphasise in recent discussions over CEO remuneration and bonuses.
The findings of the IBCB’s study concerning negative public attitudes to banks and banking culture should hold little surprise. They are consistent with the findings of an island of Ireland survey undertaken as part of the ‘Apologies, Abuses and Dealing with the Past’ project by a team of researchers at Queen’s University Belfast. Conducted just prior to the tracker mortgage scandal during June and July 2017, 77% of over 1000 respondents engaged in face-to-face interviews in 100 sampling points across every county felt that the banking sector had not adequately apologised for the banking crisis.
Although several statements of regret and some apologies were given by former and current senior bankers at the Oireachtas Banking Inquiry during 2014-15, 94% of respondents were unaware of any individual bankers having apologised. In fact more people believe that protagonists involved in the Troubles and the institutional abuse scandals of recent years have apologised than the banking sector or individual bankers for their role in the 2008 crisis. The fact that the ICBC survey also found such low levels of esteem for banks suggests that the legacy of the crisis remains potent.
Respondents felt that all of the major actors in the banking crisis have been slow to acknowledge and accept responsibility for their actions and resultant harm. Moreover, very few (4%) said they felt that Irish society should “just move on” at this point.
When asked via scales what the most important measures are for dealing with the legacy of the crisis, ensuring it never happens again by means of better regulation and attitudinal change was considered the most important measure by respondents (75%) ahead of alternatives such as prosecutions (67%) and compensation (50%).
An overwhelming majority of survey respondents felt that Irish banks have not yet fully atoned for their part in the financial crisis. Different views did emerge about the utility of apologies to address this – only 40% felt that further apologies from the banking sector would help them personally, but 73% felt it would be helpful for society as a whole.
For many interviewees, the perceived absence of meaningful apologies for the crisis is connected to scepticism that banks truly want to achieve better customer relations. In the words of one project interviewee, ‘an apology is maybe only worth giving if you want to maintain a relationship with people’.
The IBCB has noble ambitions about how bank customers should be dealt with in the future, and nobody doubts that culture change is long overdue within the sector. However it should not ignore addressing the past as it seeks to plot a way forward.
Dr Muiris MacCarthaigh is Senior Lecturer in Politics and Public Administration at Queen’s University Belfast, and Co-Investigator on the ESRC-funded ‘Apologies, Abuses and Dealing with the Past’ project. An earlier version of this blog appeared in the Sunday Business Post on 9 June 2019.