From Irish Finance Minister to
European Commissioner, Charlie McCreevy is a larger-than-life
character who has ruffled a few feathers along the way. Recently
retired after more than 30 years in politics, McCreevy speaks with
Nicola Maher and Nicholas Moody about making accounting front-page
When Charlie McCreevy qualified as a chartered
accountant in 1977, he never dreamed he would end up holding one of
the European Commission’s key postings as accounting standards
became front-page news.
As Internal Markets and Services Commissioner
from 2004 until February 2010, McCreevy was at the epicentre of the
storm that raged around accounting standards at the height of the
“I love being a chartered accountant but I
never imagined accounting and accounting rules would be headline
news and a sexy political issue,” he says.
“I never thought that accounting would become a
hot topic to be debated at European Council meetings. When I
trained as an accountant, much as we desired differently, we were
regarded as boring old people.”
The fast-talking Irishman has spent more than
30 years shuttling through the various corridors of power at Irish
He was first elected to the Dáil (Irish
Parliament) in 1977 and was Ireland’s Minister for Finance from
June 1997 to September 2004. During this time, he served on
Europe’s Economic and Financial Affairs Council (ECOFIN), including
a short stint as its president in 2004.
McCreevy is the first to acknowledge that he
expected a much less controversial time as commissioner.
The second half of his five-year tenure was
dominated by the fallout from the financial crisis, touching every
aspect from capital requirement directives to fair value rules.
“One thing I would say is that it wasn’t a
boring five years, sometimes I would have liked it to be less
exciting. I wasn’t bored for any one week in the five years I was
commissioner,” he says.
One of the most controversial aspects of the
financial crisis was the debate over fair value accounting
The European Commission, in particular the
French and German governments, pressured the International
Accounting Standards Board (IASB) in late 2008 into allowing
reclassification changes to its financial instruments standard
without following due process.
The IASB permitted the amendments to IAS 39 in
October 2008, allowing companies using IFRS the same flexibility as
those using US GAAP to reclassify assets from held-for-trading into
the held-to-maturity category.
At the time, tensions built up between Europe,
IFRS’ original backer, and the IASB, its creator, over how the fair
value standards were being shaped. McCreevy is quick to point out
the history of IFRS and the key role Europe played in its
“From 1 January 2005, all EU publicly listed
companies used IFRS. It was the EU that gave credibility to the
IASB, otherwise they would still be issuing standards but they
wouldn’t be obligatory,” he says. “We made IFRS obligatory; we were
the first jurisdiction to do that. I think that entitles the
customer, the EU, to have a say.”
McCreevy also highlights how the system for
adopting new IFRS standards in Europe was partly to blame for the
In 2002, when the EU decided to adopt
international standards into law, they decided on a process that
would allow the EC to either adopt or reject incoming standards,
but importantly, not change them, McCreevy explains.
Fast-forward six years and the EC found itself
in the middle of a financial crisis, with member states frantic
that their economies were about to go into free-fall on the back of
rapidly devaluing financial products, with little power to change
“Member states were kicking up an unholy row
and blaming us and we were in the illogical situation where we had
adopted standards, but had no great input into how they were done,”
At one stage, there were rumours the European
Commission had threatened to move away from the IASB and create its
own European standard-setting body.
McCreevy denies ever saying Europe would set up
an EU standard-setting body, but gives a nod to the suggestion that
some member states liked the idea.
Asked which countries supported such a move, he
replies: “Work it out yourself.
“What we tried to do was tell the IASB that
some changes would have to be made, because some of these things
were not sensible. But that got confused with some people saying we
were twisting the arm of the IASB. But the IASB has to recognise,
in my view, that there is a halfway house.”
McCreevy says the IASB has to be aware that
there were many legitimate arguments about the unintended effects
some of the IASB’s standards, particularly around fair value, where
“It would be my view that if the IASB was not
cognisant of some of the difficulties that some of these particular
issues raised, the pressure will come from member states to make
changes, which would be a bad thing,” he says.
“So it is a matter of applying common sense to
this. I think I operate pretty fairly – some of the IASB members
might not think like that, but I think some of the approaches of
some people [on the IASB] were a bit nonsensical.”
McCreevy says more common sense has prevailed
over the past six months and sensible changes have been made.
Despite his reputation as an IASB pariah,
McCreevy still understands the importance of an independent
“As a chartered accountant I recognise what the
value would be to have an independent standard-setting body for
accounting, auditing – I am very much for independence of it,” he
“The IASB can do as they please; I think it is
in their own interests if they want to continue to have independent
standard-setting, they have to recognise that they are not
One aspect of Europe’s sometimes
strained dealings with the IASB that McCreevy is eager to clarify
is his relationship with chairman David Tweedie.
“As someone who has fairly direct views, I
don’t have a problem with someone else that has fairly direct views
– I am no shrinking violet,” he says with a grin.
“We certainly have not agreed on everything.
I’m sorry people thought some of my utterances were negative about
the IASB. I never regarded these as personal, he about me or vice
versa, but I was there to represent a particular viewpoint and I
did that strongly – and he defended his corner.”
Asked about Tweedie’s replacement, McCreevy
concedes finding someone who matches all the attributes being
sought in an IASB chair is going to be difficult.
“[Tweedie] gave the IASB great credibility and
it is going to be a difficult job to get somebody to replace him,”
“One has to have a lot of knowledge and
expertise, one has to be a diplomat, can’t be afraid of a lot of
foreign travel and trying to bring a diverse group of people
Asked to reflect on his own replacement,
McCreevy says Michel Barnier is experienced, having previously been
a commissioner for regional policy for 1999-2004.
Despite being trumpeted by French President
Nicolas Sarkozy, McCreevy says Barnier still has to swear the same
oath to remain independent.
Any changes he wants to make will also have to
pass through the European Council and parliament, he says.
“A whole lot of consensus has to be reached. So
let’s see [how Barnier has performed] in three years time,”
McCreevy says he got on well with former US
Securities and Exchange Commission chair Christopher Cox during his
EC tenure as Cox pushed to introduce IFRS in the US. McCreevy says
what they were trying to achieve was equivalence of
“Convergence is the ideal solution, but
sometimes one has to accept less than the ideal – if you can’t get
the ideal solution, you should try to get the best and equivalence
is the best in my view,” he says.
“I don’t think you’re ever going to get the
exact same identical measures but if you can get the decisions are
equivalent that is OK.”
McCreevy says he remembers the emergence of
standard accounting practices in the 1970s when he was qualifying
as a chartered accountant.
“I would have thought at that time that it
would only be a matter of time before we could have international
standards. They should not be as difficult as sending a man to the
moon, you would think. But now I think it’s easier to send a man to
the moon than to agree some of these accounting rules,” he
McCreevy thinks the financial crisis has shown
how interconnected the world’s financial markets are, creating the
need for regulatory systems that are globalised as well.
“You can’t talk about having international
capital markets where there are totally different auditing,
accounting, regulatory and capital requirements rules – that’s
nonsense, you’ll get arbitrage in the system,” he says.
“Due to the crisis more power has been given to
the G20 and financial stability board and these have to be agreed
internationally, so I see that pressure will keep everyone focused
on the wider picture.”
After more than 30 years in public office and
eyeing up his next step, McCreevy swears politics is behind him,
rules out returning to practice and only acknowledges that he might
end up doing ‘something in business’.
“I’m not rushing into things too quickly. Are
there any nice jobs on The Accountant? I mean easy jobs!”
“My first electoral involvement was campaigning
for Ireland to join the then European Economic Community in 1972. I
never thought 40 years later that I would have ended up in the
“Hopefully God gives me good health to enjoy
the next few years and we’ll see what happens.”
This fast-talking Irishman’s not done yet.