Who were the contrarians in the Central Bank?

4.4 The Central Bank Pre-Crisis (2003 to mid-2007)
4.4.1 As in the case of the FR, there was a major domestic policy failure at the CB in respect of the maintenance of financial stability. Not only did the CB (with a small number of contrarians at board level) seriously underestimate the nature and extent of the risks in the Irish financial system but it was content to express only nuanced and somewhat indirect concerns on possible risks rather than study contingent worst-case scenarios. Had it done so, it might have issued stronger warnings (at least confidentially to the Government) or even taken appropriate action.

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4.4.5 It is difficult to fully understand why the alarming macro-economic signs detailed in Section
4.2 were regarded with such relative calm for so long by the CB. Although its Financial
Stability Reports show an awareness of such economic risks, they were not subject to further
systematic analysis. The CB consistently held the view that these risks would not materialise;
this was the case despite some internal questioning.

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4.4.8 The Commission has also noted evidence of a tendency to ensure that the FSRs should not
convey a negative message even when some internal contrarian information, analysis or view
argued for a less benign tone.There are clear indications that little attention was paid to such
material or that it was only included after toning down in redrafting. This approach risked
creating an internal intellectual climate that discouraged less senior staff from offering their
best professional assessments. It also encouraged staff to focus their research work in areas
with less relevance for financial stability but where publication would not be subject to such
pressures. While it is one thing to tone down external messages, the Commission has difficulty
in understanding the apparent lack of interest in fostering critical debate within the confidential
confines of the CB on stability issues. There are signs that, reinforced by the relatively
hierarchical structure of the CB, a climate of self-censorship had become prevalent in CB
policy work.

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