GUEST COMMENT: Ireland's banking sector needs a fundamental shake-up

Peter Nyberg's report into the failings of the Irish banking system that led to the current crisis is the latest in a line of investigations that have attempted to explain how we ended up in this mess.

Questions still remain, not least because the report falls short of identifying specific individuals either for their failure to meet their obligations to carry out effective oversight, or for their willingness to engage in imprudent practices.

What is clear from his analysis, however, is that Ireland's banking sector has witnessed an unprecedented, systematic breakdown, and a fundamental reform is required.

How should we go about doing this? We recently outlined our vision for change in the Irish banking system at our Biennial Delegate Conference, which now takes on even greater urgency in the light of the Nyberg Report.

Among the initiatives we propose are the following:

Ensure all redundancies are voluntary: Bank staff have already been unfairly scapegoated for the mismanagement of the industry. With 6,000 redundancies potentially coming in the sector, we need to ensure they are carried out on a voluntary basis.

Shake-up remuneration practices: We need to replace sales-driven bonuses and awards based on target-driven performance criteria, with a new salary structure that prioritises skills, professional development, customer service, experience and judgment based on integrity and prudence.

Drive down executive pay: Senior executives in Ireland's banks are still over-paid and receiving bonuses despite poor performance. These are in need of particular review.

Changing the culture of banking: Ireland's banks have lost sight of the fundamental values of prudence, integrity and stability. Service to customers needs to become the key priority, rather than the pursuit of excessive profits.

Reform governance: Nyberg pointed to a lack of contrarian viewpoints within the Irish banks, and we believe the new landscape needs a charter for whistle-blowers to air their concerns with appropriate legal protection. We also need to ensure greater diversity on boards, including employee representatives.

Bring the culprits to justice: Those who brought financial institutions to the brink of collapse should be held accountable for their actions.

Strengthen the regulatory and compliance environment: The Central Bank has taken steps to bolster its regulatory team in recent months, and many banks have been hiring compliance professionals. Nonetheless, there is work to be done.

How can this be done? The first step is the creation of a Forum on Banking in which key stakeholders in the financial services industry consider these initiatives.

But this doesn't go far enough. We need a specific Parliamentary committee inquiry into the banking crisis, empowered to call all of the key participants in the banking sector to appear under oath to clarify their role in the crisis. This is the only way we'll learn the lessons that ensure we never have to experience this catastrophe again.

Larry Broderick is general secretary of IBOA, the finance union