BUSINESS OPINION:Too many are still living in a state of denial about their roles in the economic predicament the country is in, writes DOMINIC COYLE

TWO SEPARATE reports setting parameters for the limited investigation into the genesis of the banking crisis conceded by the Government will be released this week.

Central Bank governor Patrick Honohan has been charged with the sensitive task of examining the failure of the regulatory authorities he now leads to identify and address burgeoning problems created by disproportionate and reckless bank lending to one sector of the economy. Economist Klaus Regling, who has extensive experience in the European Commission, the German civil service and the IMF, is looking at how the crisis unfolded, both internationally and at home, and how Irish banks responded.

While the reports will give us some limited understanding of the approach of the various players in the collapse, the available evidence indicates that too many are still living in a state of denial about their roles.

Last week, Seán Quinn, whose disastrous punt on Anglo Irish Bank was arguably the catalyst for the collapse of a dysfunctional banking system, took to the airwaves again to explain – in direct contradiction to a earlier interview – how he never knew of the guarantees given on Quinn Group debts by subsidiary undertakings of his insurance business. While conceding for the first time that it was his massive equity market play that ultimately undermined his empire and the jobs within it, he also raised once more the prospect of retaining control of his insurance business at least until he has used its profits to help pay down his debts.

He owes Anglo Irish Bank close to €3 billion and over €1 billion to bondholders. The insurance business itself also requires an injection to comply with solvency requirements and then there is the matter of finding funds to unravel the guarantees at the root of the immediate problem.

Quinn is leery of detail but it seems fanciful to suggest that seven years of profits alongside the eventual sale of the business and other property interests will meet his target.

On the same day that Quinn was entertaining RTÉ in his office, Nama chairman Frank Daly outlined exactly what was expected of the developers with whom the agency will deal as it takes control of their borrowings.

Part of the deal is that developers have to produce business plans within a month, setting out how they propose to manage their liabilities. Those plans are now due from the largest developers whose loans were the first into Nama.

Daly stressed the need for those plans to set out “detailed and credible targets for reducing their debt”.Borrowers must state how they intend to reduce their debt within a three- to five-year window. Daly made it clear that, for most, this means drawing up lists of properties that realistically can be sold to raise funds.

While those under Daly at Nama have been less forthcoming about the current state of play, his comments, along with reports of developers finalising their plans “in consultation with Nama that meet its requirements”, indicate clearly that some of our most indebted developers have yet to properly face reality.

For those in doubt, Daly stated it clearly: “In Nama’s terms, viability is not a matter of survival on taxpayer life support until the good days come again”. Those who fail to convince Nama that they have “both the will and the managerial capacity” to deliver face foreclosure.

Such blunt talking is not something to which the cubs of the Celtic tiger are accustomed.

Nor are those who funded and advised them. Accountants have bridled at several pointed comments from Daly in the past month but last week he again suggested auditors needed to reflect on their role in the banking crisis “before they can absolve themselves of responsibility”.

In response, it has been instructive that they have sought refuge in the letter of the rules that govern them without reference to the spirit.

For those in the banking sector, those who were supposed to regulate them and even a Government responsible for policy decisions that only exacerbated the problem, the reports that emerge this week will make uncomfortable reading.

Meanwhile, only €15.3 billion of the estimated €80 billion in loans have yet transferred to Nama. On the budgetary front, we face several years more of relative austerity. Within bond, equity and currency markets confidence remains fragile at best.

Before we start to take too much heart from our new role as dutiful head boy of the school of austerity, as depicted by the Wall Street Journal and others in recent times, we must recognise that a reckoning has still to be made by many formerly charged with the proper prudent management of our financial system.