Overseas loans at INBS waved through with little discussion, inquiry hears

Irish Nationwide Building Society's credit committee recommended billions of pounds of overseas loans from its Belfast base to the board for approval in the run-up to financial crisis, with little or no discussion, an inquiry into the now-defunct lender heard on Thursday.

While the loans were mainly for UK property, particularly in London, they also included facilities for clients to buy a luxury spa hotel in France and a 93-bed residential care complex and associated senior apartments in Germany, according to Brian O'Moore SC, of the legal team assisting the inquiry.

The loans originated with the Belfast office, which was led by Gary McCollum, and forwarded to the credit committee for consideration through INBS's then managing director, Michael Fingleton, according to society's former head of commercial lending, Tom McMenamin, as he gave evidence to the inquiry for a third day this week.

All three men – together with INBS's one-time finance director John Stanley Purcell – are subject to the Central Bank-sanctioned inquiry into a series of alleged breaches of financial law between August 2004 and September 2008.

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The first phase of the investigation, nearing an end, is looking at allegations that INBS’s credit committee failed to fulfil its terms of reference, which required it to properly review loan applications, consider large loans in arrears and other matters.

Mr McCollum never sat on the credit committee and is not part of the current phase of the inquiry.

Limited discussions

Mr O’Moore put it to Mr McMenamin that the Belfast office loans were put through the committee “without any discussion at all” before going on to the board for final approval.

Mr McMenamin said there was "very little" discussion about the facilities. However, he did note that one member of the committee for a period, Martin Noonan, had highlighted during meetings that he had a problem with the limited discussions on the Belfast loans.

In cross-examination of Mr McMenamin, Mr Fingleton, who is defending himself in the inquiry, highlighted that commercial loan applications were dealt with and processed to the extent that they would only progress to the credit committee if they were “almost certain to be approved”.

“Wouldn’t that have been the policy and the practice? And that might explain why so few applications were declined,” Mr Fingleton said.

Mr Fingleton also noted how Mr O’Moore had asked Mr McMenamin on Wednesday if the society’s long-time managing director had been referred to internally as “the boss”.

“I’m glad Mr O’Moore didn’t ask you yesterday was that a term of affection,” said Mr Fingleton, who led the society for 38 years before stepping down in 2009, after the State was forced to guarantee the financial system to prevent it from collapsing.

“A term of endearment,” Mr McMenamin replied.