BUSINESS OPINION:KEVIN MURPHY'S response to the Central Bank's fitness and probity examination appears breathtakingly cynical. The Irish Life & Permanent chief executive is one of three current directors of a regulated financial institution whose appointments predate the financial crisis.

As part of the post-crisis reforms they must now be scrutinised to see if their past actions render them unfit to run a bank.

The new regime came into effect at the start of the year and a multi-step process has kicked off with the three, Murphy, Richie Boucher of Bank of Ireland and Fergus Murphy of EBS all receiving letters saying they may now be subjected to an examination and seeking their initial response.

After receiving their response the Central Bank will decide whether to go through with the examination by an independent outsider.

On receiving his letter Murphy replied to the regulator saying that because he was no longer a director of Irish Life & Permanent’s banking subsidiary – he resigned from Permanent TSB late last year – the issue was moot. The fact that he remains a director of its parent Irish Life & Permanent was in effect irrelevant because the letter from the Central Bank was in respect of the subsidiary.

He is, of course, absolutely correct and his supporters – of which there are plenty – point out that he is merely playing things by the book in what is going to be a long and very legalistic process. The presumption is that the regulator will now – if it has not already – send him another letter with the correct regulated financial institution on it this time.

And Murphy will of course co-operate say those who are close to him. So it’s really just a case of round one to Murphy, with many more rounds to come. It would have been nice if Murphy had written back pointing out to the regulator that while he no longer qualified because he had resigned from Permanent TSB, he understood the spirit of what the regulator was up to and felt he should be examined in respect of his continued stewardship of a very large State-owned financial institution.

But the world does not work that way. Murphy’s seemingly antagonistic stance can be understood thus, but one suspects it may turn out to be a mistake as he may well win his battle but will almost certainly lose his war.

A bank chief executive who holds on to his job only after triumphing over the regulator in legal hand-to-hand combat is going to be a lame duck, particularly when the bank is owned by the taxpayer.

The best chance Murphy and his two peers have of emerging successfully from the process is to accept its legitimacy and co-operate willingly. By the same token the Central Bank must bend over backwards to ensure the process is fair and transparent and does not turn into some sort of witch-hunt.

All three men can make reasonable arguments for why they should stay in their jobs. Murphy in particular can point to his role in the Irish Life side of the business in the run up to the crisis and how Irish Life kept the rest of the business afloat.

Likewise Boucher can argue that his efforts over the last two years have allowed Bank of Ireland avoid nationalisation and that this must be taken into account when passing judgement on his role in ramping up Bank of Ireland’s commercial property lending.

Fergus Murphy will no doubt point out that he had only joined the EBS board in the months before the crisis broke.

Which way they jump will become clear shortly. Will they resort to Falluja-style house-to- house fighting with the Central Bank or take the opportunity to demonstrate that the days when what was legal could trump what was ethical are over in Irish banking?