Central Bank fines and disqualifies former INBS executive Gary McCollum

The Central Bank has fined former Irish Nationwide Building Society (INBS) executive Gary McCollum €200,000 and disqualified him for 15 years for several breaches of financial services laws relating to commercial lending and credit risk before the lender's collapse.

Mr McCollum, a one-time head of UK commercial lending and at the society, was one of five former INBS directors and executives that were put forward for a public inquiry in 2015 by the Central Bank.

Hearings

Since public hearings started in late 2017, the Central Bank has reached settlement agreements with two of original five – former INBS chairman Michael Walsh and one-time head of commercial lending Tom McMenamin. It dropped its case against the failed lender's former long-standing managing director, Michael Fingleton (83) in December, 2019, due to his ill-health.

INBS's former finance director, John Stanley Purcell, is the last of the five to remain subject to inquiry.

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He continues to defend himself robustly as the investigation, looking into seven sets of alleged regulatory breaches between August, 2004, and September, 2008, is in its final phase.

Mr McCollum, who joined INBS in 1997 and drove rapid expansion of the group’s UK loan book from a base in Belfast during the property boom years, has admitted to participating in “significant failures by INBS to adhere to its own policies at each stage of the commercial lending and credit risk processes, resulting in poor risk management, ineffective governance and high risk lending”, the Central Bank said on Tuesday.

INBS’s UK commercial property lending grew from €2.96 billion in 2005 to €5.19 billion in 2007 and comprised more than 50 per cent of the value of INBS’s commercial loan book in that period.

“This expansion into development finance, which carried with it a much higher credit risk for INBS than its traditional residential lending, proceeded with insufficient checks and balances during the relevant period,” the Central Bank said.

“While policies and procedures existed on paper, there was a systemic failure to ensure they were implemented or followed in practice.”

Breaches

Mr McCollum admitted to participating in regulatory breaches including a failure to ensure that loan applications were processed in line with internal policy, and shortcomings in the taking of security, obtaining valuations and adhering to policy requirements concerning maximum loan to value ratios. He also admitted to failing to ensure that loans were actively monitored.

“In this respect, his actions and/or omissions whilst reckless, were not deliberate or dishonest,” the Central Bank said. “Ultimately, the makeup of INBS’s loan portfolio left it exposed during the global financial downturn.”

Between 2008 and 2010, INBS suffered financial losses in excess of €6 billion, primarily arising from the impairment of its commercial loan book. INBS cost taxpayers €5.4 billion to rescue during the financial crisis, before its remains were folded in with Anglo Irish Bank in 2011.

The combined entity, known as Irish Bank Resolution Corporation (IBRC), was put into liquidation in 2013.

The period of Mr McCollum’s disqualification from acting in a management position of a Central Bank-regulated financial firm took effect from June 10th.