THE GOVERNMENT said last night it had not received an explanation from Irish Nationwide Building Society (INBS) for the reasons behind the abrupt resignation of its chairman, Dr Michael Walsh.
His departure yesterday evening makes INBS the fourth Irish lender guaranteed by the State to lose a chairman or chief executive in less than three months.
INBS has, under direction from the Financial Regulator, been seeking to strengthen its management team by recruiting three executives to work directly under chief executive Michael Fingleton, for decades the dominant force in the business.
The Government is soon likely to turn its attention to the future of INBS as it proceeds with the recapitalisation of Allied Irish Banks and Bank of Ireland. Although few observers in the financial community believe the society will have the strength to forge an independent future for itself, company secretary Stan Purcell told staff yesterday that INBS will “probably” be the only financial institution not to seek capital from the Government in the coming weeks.
Dr Walsh’s resignation comes amid multiple regulatory investigations into Anglo Irish Bank’s concealment of multimillion-euro directors’ loans to its former chairman Seán FitzPatrick with short-term loans from INBS.
It emerged yesterday that Irish Nationwide had provided tens of millions in sterling and US dollar loans to Mr FitzPatrick.
Dr Walsh’s departure led to a call from Green Party Senator Dan Boyle for further departures from the building society over its involvement in the Anglo loans affair. “Michael Walsh’s resignation goes some way towards recognising the major failures that have occurred in Irish Nationwide. But it cannot be seen as the only resignation either from that company or from within the Irish financial sector more generally.”
Moody’s credit rating agency downgraded the society two days ago by two notches to one level above speculative grade or “junk” status, citing its vulnerability to the property market decline.
The INBS spokesman declined to explain the reasons for Dr Walsh’s departure. “We’ve no further comment to make other than he has communicated his decision to resign.”
In a statement, Minister for Finance Brian Lenihan said the appointment of a new chairman was a matter for the INBS board, and said two of its directors were appointed under guarantee legislation to protect the public interest.
Although the Financial Regulator is likely to communicate the reasons for the resignation to the Government, it is believed that Dr Walsh did not cite any specific new issues emerging within the society. “We have already discussed this and received an explanation from Michael Walsh,” the regulator’s spokesman said.
Dr Walsh is said to have telephoned Mr Fingleton yesterday to say he would be resigning and then sent a resignation note to Mr Purcell. No board meeting was held to discuss the matter, although the board of the building society had been scheduled to meet on Friday. The board is now expected to meet today.
In an internal circular, Mr Purcell said the Moody’s downgrade on Monday was “part of a pattern” of downgrades since the onset of the credit crunch and the downturn in the economy and property markets. There would be “a series of similar downgrades” for the financial institutions in the coming weeks, he said.
“It should be noted that the society has a buffer of €1.5 billion in reserve to absorb any negative impact on its business,” he said.
“INBS probably will be the only financial institution not seeking capital from the Government in the coming months.”
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