Comments by government Ministers that Irish banks had a particular duty to assist the national effort to deal with the Covid-19 outbreak reflects a widespread belief that banks have a moral as well as material responsibility to assist the Irish public. And it had an immediate effect, with a range of measures being introduced to alleviate pressure on those with bank loans. Several banks have decided to award extra pay to front-line staff dealing with the public through the coronavirus crisis. Pressure on government to lift a €500,000 cap on bank CEO pay that had being building through 2019 seems to have has dissipated.
The enduring belief that domestic banks still have a debt to pay runs deep in Irish public life and can also be connected to the astonishing results of the recent Irish general election. Indeed, if it hadn’t been for the Covid-19 crisis, the ongoing uncertainty over the composition of the Irish government post-election would be dominating local headlines. The fact that the two traditional ‘big beasts’ of Irish politics – Fianna Fáil and Fine Gael – have entered negotiations to form an administration is historic. Both trace their origins to a century-old civil war split which meant that coalition was, before now, largely unthinkable.
Since 1932, no Irish government has ever not involved one of them as the main (or only) governing party. And as recently as 2007, on the eve of the financial crisis, the two parties commanded over two-thirds of first preference votes between them. This combined vote has tumbled to just over 50% in 2011, then under 50% in 2016. In the recent February 2020 election their combined first preference vote stood at 43% as Sinn Féin made a historic breakthrough, securing almost a quarter of all votes, and the Labour Party struggled in single-digits. Disaffection with the traditional parties has resulted in one of the most fragmented parliamentary systems in Europe, and experiments with alternative forms of democratic decision-making.
Exit polls for the recent election suggest that it was not climate change, or maintaining economy recovery, but rather health (32%) and housing and homelessness (26%) that voters identified as their top policy priorities when casting their vote. And here the connection to the banking crisis lies. Investment in both the health system and social housing were major casualties of the Irish response to the combined financial and economic crisis of 2008, as successive governments undertook a six-year period of retrenchment before sustained recovery in 2014. The legacy of this underinvestment continues to create major national problems, ranging from homelessness to concerns expressed by the European Centre for Disease Control that the Irish intensive healthcare system may not be able to cope with Covid-19 cases.
The scale of the crisis was in large part due to the near collapse of the Irish domestic banking system and the need for the Irish state to effectively nationalise most of the sector. The most recent official estimates put the cost of this ‘bank bailout’ to the Irish exchequer at over €40 billion, as well as in excess of €1 billion a year in interest alone.
As well as the legacy of the 2008 crisis, banks have come under fire more recently for overcharging thousands of customers in respect of mortgage products, for which they have had to pay substantial compensation. The banking sector has sought to address its poor public image, including funding a new Irish Banking Culture Board (IBCB), with banking and also external stakeholders on its board. However the backlash to the CEO of one bank suggesting that dealing with the tracker mortgage scandal was ‘annoying’ and that the Central Bank should ‘turn the page’ touched a nerve, with an apology ensuing afterwards.
It’s unclear how effective the measures undertaken by the banks to assist the national effort to tackle Covid-19 will be, or how long they will last for, but what is not in doubt is that Irish banks could do with a ‘good news’ story.