Former INBS manager says lending policies required ‘pinch of salt’

Every file examined in review ahead of planned sale of building society ‘had something missing’

A former Irish Nationwide Building Society (INBS) manager told a long-running inquiry into the now-defunct lender that lending policies at the society were to be taken with "a pinch of salt" and that none of commercial loan files he reviewed as part of a large exercise before the property bust were in order.

Lending in INBS was "entirely informal and was controlled" by the society's long-time managing director, Michael Fingleton, said Brian Fitzgibbon, who worked at the lender between 2000 and 2008. That included a six-month period to April 2005, when he was put in charge of reviewing commercial loans ahead of what would prove to be an failed attempt to sell INBS.

“When you look at Irish Nationwide’s policies and processes, you must take them with a pinch of salt,” Mr Fitzgibbon told a hearing on Friday.

Mr Fitzgibbon also said that every file he went through during his review “had something missing”, including personal guarantees that were supposed to be in place from borrowers, valuation reports, deeds and other security. “There wasn’t one file that was in order,” he said.

The inquiry, originally set up in 2015 on foot of a Central Bank order and which started public hearings three and a half years' ago, held its first public session of 2021 on Friday. That followed a number of private hearings since last November during which confidential information on 98 sample commercial loans were examined. These accounted for 20 per cent of INBS's commercial loans as of early 2010.

The inquiry was set up to look into seven sets of alleged regulatory breaches – or suspected prescribed contraventions – between July 2006 and September 2008.

The inquiry's three-person panel, chaired by Marian Shanley, has previously examined three of the suspected contraventions: concerning the role of INBS's credit committee; reporting to the board on commercial lending; and absence of a formal credit policy for the setting up of profit share agreements with developers on building projects.

‘Context hearings’

The final four suspected contraventions – all relating to the 98 specific loans – are being wrapped up in the final phase that has been running since October. Public “context hearings” relating to this, where witnesses are not allowed to refer to individual borrowers, are set to continue into next month.

Eoin McCullough, SC, for the legal team assisting the inquiry, said the evidence suggests that “there appeared to be many occasions” where policies and procedures weren’t followed when it came to granting of commercial loans. These included policies on securing personal guarantees from borrowers and valuation reports on assets before loans were granted, as well adhering to loan-to-value limits.

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

Former finance director John Stanley Purcell and one-time head of UK lending, Gary McCollum, are the only remaining subjects to the inquiry.

Mr Purcell, who has consistently defended himself throughout the inquiry, denied on Friday that he participated in the allegations currently being considered. He said that certain policies being referred to by the legal team were merely guidelines, while others were not approved by the board.

Mr McCollum also denied allegations made against him when addressing the inquiry last November.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times