An Institutional Architecture for Meta-Risk Regulation in Irish Banking: Lessons from Anglo Irish Bank’s Minsky Moment

Abstract

The paper maps the risk management failures within Anglo Irish Bank, showing that, when banks are systemic in nature, poor internal corporate governance within a Minsky credit cycle can lead to destabilising macroeconomic conditions, which may prolong the effects of a credit-induced downturn. The paper highlights a failure of management at Anglo Irish Bank to establish and measure firm-level risks and develop appropriate internal controls to support a culture of prudent credit management. We propose the adoption of a novel supervisory architecture based on the meta-risk regulatory philosophy, which is designed to strengthen risk management practices at banks.

Keywords: Corporate Governance, Regulation, Banking Crises, Meta-risk regulation, Ireland

JEL Classification: G18, E12, G38