Nick Leeson, the man who brought down one of the world's oldest banks with huge rogue trading losses, believes it was obvious that Ireland was heading for a spectacular crash.
A few years after his release from prison in Singapore in 1999, Leeson moved to Galway to start a new life and found an "excessive" and "irresponsible" property bubble taking shape.
"Looking at Galway in isolation there was a lot of money coming into the city, lots of buildings being built, new housing estates and deluxe apartments going up here, there and everywhere. The lending was excessive and it was completely irresponsible, in my opinion. Bank managers were set sales targets rather than what would have been deemed responsible lending," Leeson told the Sunday Tribune in an exclusive interview ahead of an IIFT seminar next week (see right).
"No developer has gone out of business in this country that I can see. Until there is a bit of blood-letting and there is some attempt to get back to a platform from which you can move forward I just don't see the path out of this."
Not only was the lending excessive, Leeson believes, but added to the mix was a lack of controls within the banks, and at the Central Bank and Financial Regulator.
It's something Leeson can relate to. After starting as a clerk in Coutts and progressing through a series of banking jobs in London, the plasterer's son from Watford joined Barings, an institution with a 233-year history of conservative money management. As a star moneymaker for the venerable bank, he was posted to Singapore with his then wife Lisa, to trade futures on the Nikkei, the Japanese stock market.
He eventually began unauthorised trading in futures contracts using an error account to hide his losses, which mounted to enormous levels following a bad bet on the direction of Japanese stocks. In a panic, Leeson dived in deeper, buying up tens of thousands of contracts in a vain attempt to move the market in his favour. In the end he drove Barings $1.3bn into the red, overwhelming the bank's capital reserves and putting it out of business forever.
Leeson went on the run before being captured in Germany and finally being sentenced to prison in Singapore.
It was the lack of internal controls and compliance within the bank that Leeson said led to the huge losses being hidden from his superiors.
"When the banks look at it, they say we can pay somebody half a million to go and trade for us and potentially make five million or we can pay half a million for a risk manager who is going to earn us fuck all and might save us from failing in the future. They are going to pay the trader half a million. Some organisations are risk-averse and they would probably think half a million invested in a risk manager who knows what he is doing is a worthwhile exercise and there are others who don't.
"When I was working in banking the main ethos was, there is a limited amount of money to be made, you get there first, you work out the best ways to get around the rules and you make as much money as quickly as you can.
"Nobody challenged me when I was at Barings in Singapore because they considered me to be this uber-trader who's making serious amounts of money and we can't really say anything against him."
He sees parallels in Ireland where official controls – inside and outside the banks – failed to rein in the buccaneering property lending that ultimately brought the industry to its knees.
"Banking is a highly lucrative industry. It is highly pressurised. Not everybody can make money and there are people cutting corners all the time. That is why your regulator, compliance and risk management and your overall controls have to be top-notch. When you are looking at Ireland as an example, it's far from that. The buck for me stops with central banks and government. The central bank is a function of the government. If you have people in central banks or government who don't understand what is going on, which is what I think happened, you have no chance at all."
He likens this asymmetrical relationship to the one between doctor and patient.
"When you see a doctor you tend to accept 100% of everything he is telling you. We are not equals in that sort of environment. I experienced this myself when I had cancer in Singapore. Eventually the thing that quickly becomes apparent is you need to arm yourself with knowledge so you can challenge the doctor, ask him questions, get more involved. It should be exactly the same in the world of banking."
For all the systemic failures that Leeson said allow fraud and banking collapses to happen, he believes fear drives people from bad to worse. Individual mistakes snowball into massive crises because people are afraid to come clean.
"You get yourself into a situation where the psychological pressures determine what you do. If I look at my own situation, I had a domestic relationship, I had a status relationship with the people who worked for me and a status relationship with the people I worked for. It's those psychological situations where putting your hand up and saying 'help, I'm in the shit, this is what I've done' becomes very difficult.
"Look at [AIB rogue trader] John Rusnak. Why did he continue what he was doing? I reckon he kept going because he couldn't tell his wife."
Leeson said this dynamic is at work at every level in banking. This is why we get a drip-feed of revelations from busted companies, he said: the bosses cannot face admitting their mistakes.
"On the occasion where a CEO is covering something up, it's because they can't tell the people around them."