The Central Bank’s investigation into the collapse of the Irish Nationwide Building Society (INBS) – which concluded with publication of a report last week – followed a depressingly familiar pattern.
First there was anger. Lots of anger. The collapse of the building society in 2010 led to a €5.4 billion bailout. It was a disproportionately large part of the €45.7 billion bill for bailing out the banking sector during the financial crisis. The debacle confirmed decades of suspicion that the building society was run as a personal fiefdom by chief executive Michael Fingleton. It led to more public outrage during a very angry time.
Then came fear. Fear on the part of politicians – correctly as it turned out – that all of this anger would be vented on them come election time.
After fear comes the third stage of Irish inquiries; activity masquerading as action. The Central Bank – then known as the Financial Regulator – began an investigation into the INBS’s activities between 2004 and 2008. This confirmed what it already knew: that the building society’s governance and risk management were a joke.
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This five-year investigation concluded that a wider investigation was needed to see if the INBS had broken the law and if its management was involved. This led to the setting up of the second inquiry in 2015, which delivered its findings last April and finally wrapped up last week.
But before that, we had two more phases to go through. The next was apathy.
A constitutional challenge by Fingleton and his lieutenant Stan Purcell effectively put the whole thing on hold for two years. It also took much of the heat out of the inquiry before it finally got going in 2017. It then sat for 105 days over the next four years amid waning public interest.
The Central Bank reached settlements – involving sanctions and fines – with former chairman Michael Walsh and former executive Tom McMenamin in 2019. It settled with William Garfield McCollum in 2021. A permanent stay was put on inquiries into Fingleton on medical grounds, leaving only Purcell in the inquiry’s sights. He was fined €130,000 and disqualified from being a director for four years.
We finally arrived at stage five last week: resignation. The publication – 15 years after the event – of the final report on how a small and badly run building society played an outsized role in our national bankruptcy has been met with barely a shrug.
It might seem overly cynical, but the five-stage Irish inquiry process would seem to serve the interests of everybody involved, except for those looking for a timely explanation of how something went seriously wrong and who is responsible.
The delay suits politicians well enough – as long as the inquiry is set up promptly enough. A quick start, followed by years of hearings and legal challenges is just fine. They are pretty much in the clear once the inquiry is set up as commenting on the work of statutory inquiry – no matter how slow or badly run – breaks the convention that they can’t interfere in the work of inquiries. And of course, they can take no remedial action until the inquiry is finished as that would prejudge the outcome.
The attractions of the five-stage process for the subjects of an inquiry are equally obvious. The more time passes, the less the public care about the result when it comes. That makes it easier for all concerned to dismiss the findings as past tense and move on.
The legal profession is happy to facilitate all of this, but the real enablers are us. We have bought into the notion that it is not possible to get answers to any serious institutional or regulatory failure in less than half a decade.
The Central Bank, in fairness, appears alive to the unsatisfactory nature of the INBS inquiry. It published a market commentary along with the inquiry report that touched on this. There is a section devoted to the “importance of the Central Bank’s investigation and inquiry into INBS”.
It leans heavily on the lessons the bank can take from the process, noting that: “As the inquiry proceeded, the Central Bank continuously reflected on what it could do better; developing improvements to both its internal investigative and inquiry processes.”
It concluded that “this investigation and inquiry have had an enduring and positive effect on the Irish regulatory environment”. It sets out various measures put in place to ensure the smoother running of inquiries.
The Central Bank was less effusive about how the 15-year €24.3 million process bolstered its authority as a regulator. “The Central Bank’s ability to bring inquiries to conclusion is critical to the effectiveness of its enforcement regime,” it commented, somewhat elliptically.
It said it was important that “individuals understand the Central Bank will use the full extent of its powers to pursue cases to their conclusion and to hold relevant individuals to account.”
That is not exactly the message conveyed by yet another five-stage Irish inquiry.
