Here's a working paper with KPV O'Sullivan on Anglo Irish Bank, the corporate landscape in Ireland, and our macroeconomic transition. I'd welcome any comments readers have on this paper.

Abstract.

We map the corporate governance failures within Anglo Irish bank to the banking system as a whole, showing that, when banks are ‘systemic’ in nature, poor internal corporate governance within a Minsky credit cycle can lead to destabilising macroeconomic effects, which may prolong the effects of a credit-induced downturn. We argue for the creation of an independent risk management department within Irish banks, and a shift to meta-risk regulation by the Irish Financial Services Regulatory Authority (IFSRA) to re-build confidence in financial markets. To facilitate a transition to a meta-risk regulatory framework, We have proposed a new architecture of meta-risk regulation in the Irish banking system within this paper. It includes the creation of a risk and compliance unit at the IFSRA (Financial Regulator) as well as a financial services risk committee to foster greater risk management practices in the financial system.

[Download the working paper]

7 Responses to “Corporate Governance Failure: Anglo Irish Bank’s Minsky moment”

1. Paul G.

   14/05/2010 at 10:51 am

   Great paper, alot of food for thought here. Figure 4 at the end of the document is particularly frightening.

2. Stephen

   15/05/2010 at 3:50 pm

   Hi Paul, thanks for the comment, any ideas/comments you've got on the paper would be most welcome. Best, Steve

3. M Tian

   15/05/2010 at 5:22 pm

   since Ireland is liberate market economics, now if government influence with institutional arrangement.. will Ireland change to coordinate market economics?

4. M Tian

   15/05/2010 at 5:23 pm

   since Ireland is liberal market economics, now if government influence with institutional arrangement.. will Ireland change to coordinate market economics?

5. Stephen

   15/05/2010 at 6:35 pm

   Hi Tian, I don't see Ireland changing itself overly during the crisis, though our faith in markets may have been shaken somewhat by recent events. What kinds of changes did you have in mind?

6. Mu

   15/05/2010 at 10:23 pm

   http://www.nytimes.com/2010/03/08/opinion/08krugman.html

   Krugman who is not pro-free market, was worried that US would become the second Ireland... and Obama is not fan of free market too... who does not think deregulation would benefit. and in the paper, it is suggested that the institutioanl arrangement is necessary to help impove corporate governance...
   so I think if that really will be implemented, will Ireland still be the member of liberal market economy...or it will change itself to cooridnated market economy.... and the smarkt economy could be realized by adopting liberal market economy?

7. Stephen

   16/05/2010 at 8:24 am

   Hi Mu, have you seen the FT article on Ireland? It makes many of the same points: http://www.ft.com/cms/s/2/67ae51e2-5e35-11df-8153-00144feab49a.html