Let me now expand briefly on some of these points. The excessive demand boom, fuelled by private/public consumption and residential investment spending, led to persistent inflation and unit labour cost differentials, losses of competitiveness and asset price inflation – notably in the housing market – in the countries that had to converge to the euro area average and also in Ireland.
One of the revised Core Principles stresses the importance of sound corporate governance and the essential need for strong risk management processes. The guidance states that a bank’s board must have, collectively, a sound knowledge of the activities undertaken by the firm. This collective familiarity among the boards of some of the largest banks was strikingly absent.