The failure to put some problem loans before a committee set up to deal with the issue was a failing of Irish Nationwide Building Society (INBS), its former credit administrator Frank Casey has conceded.
Under cross-examination at the Central Bank’s inquiry into the building society’s failure on Friday, however, Mr Casey denied being to blame for the failure to alert the committee to every bad loan on the bank’s books.
Previously a commercial lending administrator at INBS, and therefore responsible for rating and reviewing the credit risk of mortgages, Mr Casey was appearing at the public hearing for the third day in succession where he was cross-examined by both former chief executive Michael Fingleton and ex-company secretary Stan Purcell.
Mr Casey said he regularly sent on his reviews of problem loans to fellow committee members but added that following a change involving the chain of command in June 2006 he stopped forwarding on such reports, although they were still available to senior executives.
“Once I stopped submitting them I never heard anything back from any element within INBS that I should continue to ensure the reviews went to the credit committee,” said Mr Casey.
Mr Casey said he was not alerted to the fact that the financial regulator subsequently raised concerns about the fact that not all reviews were being submitted to the committee.
“It was never communicated to me. I heard nothing to indicate that I should have continued to forward on reviews,” he said.
“Was I mistaken? Well, if I wasn’t sending these reviews then the committee, as part of their terms of reference, could have come looking for them,” Mr Casey added.
He accepted under cross-examination from Mr Purcell that as a member of the committee it was part of his role to bring to his colleagues’ attention the fact that not all bad loans were included in the information they had in front of them to review.
Mr Casey said that in the early days of the committee’s meetings the scale of the problem was relatively small but that things changed significantly in later years when the level of “unacceptable loans” jumped.
The Central Bank inquiry is seeking to establish if Mr Fingleton and three other former managers of the building society were involved in seven so-called contraventions at INBS between August 2004 and September 2008.
The others are former INBS finance director John Stanley Purcell, one-time commercial lending manager Tom McMenamin and Gary McCollum, who once led the society's UK lending activities from Belfast.
The first module of the inquiry, which has been postponed a number of times, is looking at whether the society’s credit committee failed to adhere to internal policies by not reviewing cases of large commercial loan arrears, exposure to specific sectors or customers, or issues raised by internal audit, outside advisers or regulators.
The inquiry's three-member panel is led by chairwoman Marian Shanley. It resumes next week with Mr Fingleton's former secretary Melody van der Berg appearing along with Martin Noonan, Alan Deering and Darragh Daly.