‘Walk softly and carry no stick’: Culture, opportunity and irresponsible risk-taking in the Irish banking sector
| DOI | 10.1177/1477370819870156 |
| Published date | 01 January 2020 |
| Date | 01 January 2020 |
| Subject Matter | Articles |
https://doi.org/10.1177/1477370819870156
European Journal of Criminology
2020, Vol. 17(1) 86 –105
© The Author(s) 2019
Article reuse guidelines:
sagepub.com/journals-permissions
DOI: 10.1177/1477370819870156
journals.sagepub.com/home/euc
‘Walk softly and carry no
stick’: Culture, opportunity
and irresponsible risk-taking
in the Irish banking sector
Joe McGrath
University College Dublin, Ireland
Abstract
This article examines the generative conditions giving rise to the commission of irresponsible
risk-taking in the Irish banking sector using differential association and opportunity theories.
This framework is used as a lens to demonstrate how, at both an individual and a group level,
ideas, beliefs, expectations, rewards and punishments had a causal impact on banking culture,
where competitive and aggressive risk-taking was prioritised, networked and routinised. Though
differential association theory and opportunity theory are usually treated as separate (and
somewhat opposing) perspectives, this article offers a framework that integrates them both. It
employs differential association only as a partial explanation, explaining that wrongdoing does not
occur only where there is an excess of ‘definitions’ favouring it; it occurs when capable guardians
are removed or undercut. The opportunity perspective is adopted to examine how the absence
of credible supervision and enforcement in the financial services sector created situational
conditions that facilitated wrongdoing. Moreover, opportunity theory is valuable in this context
because it explains that the extent to which protection is offered often depends on political
processes to create a structure and culture of enforcement and prosecution of offenders. Prior
to the crisis, Ireland was championing light-touch regulation, advertising itself as an attractive
place to do business, in which there was insufficient political support for tough sanctions to
address financial wrongdoing.
Keywords
Differential association theory, Ireland, opportunity theory, principles-based regulation,
responsive regulation, white-collar crime
Introduction
In 2008, Ireland experienced a catastrophic financial crisis. Irish banks had been lending
money in an irresponsible manner to property developers, on the basis of fragile security,
Corresponding author:
Joe McGrath, Sutherland School of Law, University College Dublin, Belfield, Dublin 4, Ireland.
Email: joe.mcgrath@ucd.ie
870156EUC0010.1177/1477370819870156European Journal of CriminologyMcGrath
research-article2019
Article
McGrath 87
without leveraging themselves properly or diversifying sufficiently into other forms of
lending (Honohan, 2010; Nyberg, 2011; Regling and Watson, 2010). Cheap and easy
credit had fuelled an ‘old-fashioned asset bubble’ (Kinsella and Aliti, 2013: 561). The
Irish government agreed to guarantee the liabilities of Irish banks to allow them to con-
tinue borrowing from foreign markets. The guarantee was four times its annual gross
domestic product (Kinsella and O’Sullivan, 2013: 14). The state subsequently recapital-
ised its two largest banks, Allied Irish Banks (AIB) and Bank of Ireland (BOI), and
nationalised its third-largest bank, Anglo Irish Bank, considered ‘the world’s worst bank’
(Lewis, 2011).
This article examines the generative conditions giving rise to the commission of
irresponsible risk-taking in the Irish banking sector. Although acknowledging that an
anomic culture may also have been an important generative condition (Healy, 2018),
an analysis of the wider socioeconomic context is beyond the scope of this article.
This article analyses micro-level influences within the Irish banking sector through
the lens of differential association and opportunity theories. Differential association
theory (Sutherland, 1947) suggests that behaviour is learned in interaction with other
people in intimate personal groups. Occurring at both individual and organizational
levels, there is a process of communication through which motivations, drives and
rationalizations are shared (Matsueda, 2006). This framework is used as a lens to
demonstrate how ideas, beliefs, expectations, rewards and punishments had a causal
impact on banking culture, where competitive and aggressive risk-taking was priori-
tised, networked and routinised.
Though differential association theory and opportunity theory are usually treated as
separate (and somewhat opposing) perspectives, recent literature suggests they both play
a role in generating wrongdoing (Weisburd, Groff and Yang, 2014). This article offers a
framework that integrates both theories. It employs differential association only as a
partial explanation, explaining that wrongdoing does not occur only where there is an
excess of ‘definitions’ favouring it; it occurs ‘when capable guardians are removed or
undercut’ (Matsueda, 2006: 8). The opportunity perspective is adopted to examine how
the absence of credible supervision and enforcement in the financial services sector cre-
ated situational conditions that facilitated offending (Benson and Simpson, 2009). The
opportunity perspective argues that wrongdoing is committed when a suitably motivated
and skilled person or group of persons perceive that a target is attractive and not ade-
quately protected (Cohen and Felson, 1979; Eck, 1995).
It is shown that principles-based regulation was adopted but that this did not ade-
quately protect the financial system or the state. Regulators were too deferential and too
trusting of the banks they were regulating and lacked credibility because they failed to
escalate from compliance-orientated to sanctioning approaches. Moreover, opportunity
theory is valuable in this context because it explains that situational conditions can facili-
tate or impede particular types of white-collar offending, that criminal opportunities arise
when targets are not protected adequately and, crucially, that the degree to which protec-
tion is available often depends on the extent to which the political process creates a
structure and culture of enforcement (Shover and Hochstetler, 2006). In Ireland, there
was very little political will to support a more stringent approach to financial regulation
or to empower a more intrusive regulator, which might have curbed opportunities for
To continue reading
Request your trial