Causes of Banking Crisis - Full text and all findings

The full text of the 172-page Report of the Commission of Investigation into the Banking Sector in Ireland was published on April 20, 2011.

Systemic financial crises, like the recent Irish one, require a great number of institutions, enterprises 

and individuals to simultaneously follow unsound policies or practices. Each one is, of course, 

responsible for their own actions and inactions contributing to the accumulation and realisation of risks 

in financial markets. Nevertheless, responsibility for such a crisis is likely to be widely distributed. The 

Commission has, in keeping with its Terms of Reference, evaluated how various institutions 

contributed to the Irish financial crisis. 

This Report explores what the Commission considers to be the most important policies, practices and 

linkages that contributed to the financial crisis in Ireland. A very large amount of documentation was 

analysed and many relevant people were interviewed. In explaining the simultaneity of the failures in 

Irish institutions, the Commission frequently found behaviour exhibiting bandwagon effects both 

between institutions (“herding”) and within them (“groupthink”), reinforced by a widespread 

international belief in the efficiency of financial markets. Based on this, the Report finally offers some 

lessons that could help avoid future similar occurrences in Ireland and elsewhere. 

Much points to the development of a national speculative mania in Ireland during the Period, centred 

on the property market. As in most manias, those caught up in it could believe and have trust in 

extraordinary things, such as unlimited real wealth from selling property to each other on credit. Even 

obvious warning signs went unheeded in the belief that the world had changed and that a stable 

economy was somehow automatically guaranteed. Traditional values, analysis and rules could be 

gradually less observed by the banks and authorities because their relevance was seen as lost in the 

new and different world. When it all ended, suddenly and inexplicably, participants had difficulty 

accepting their appropriate share of the blame for something in which so may others were also involved 

and that seemed so reasonable at the time. 

So too was a 6-page note from the Department of Finance which includes all the recommendations contained  in the Report.

The full text of both Documents are available below.