Goldman Sachs had concerns over INBS information, inquiry told

Wall Street firm was hired to manage abortive sale of building society before crash

INBS picked Wall Street investment bank Goldman Sachs in September 2007 to conduct a long-awaited sale of the building society.

INBS picked Wall Street investment bank Goldman Sachs in September 2007 to conduct a long-awaited sale of the building society.

 

Goldman Sachs, which was hired in 2007 to manage an abortive attempt to sell Irish Nationwide Building Society (INBS) before the financial crash, told regulators at the time it had concerns over the availability of information from the lender, an inquiry into INBS heard on Wednesday.

INBS picked the Wall Street investment bank in September 2007 to run a long-awaited sale of the building society, including the compilation of detailed financial data for prospective buyers. However, the sale was ultimately abandoned the following year as global financial crises unfolded.

The Central Bank’s acting head of banking supervision Yvonne Madden, who led a team that supervised INBS in the run-up to the crash, told an inquiry into alleged regulatory breaches at INBS that Goldman “did express concerns about the availability of information” from the society during a meeting with regulators during sales process.

The comments came as Ms Madden appeared as a witness for a second time under an inquiry into whether four former executives at the now-defunct lender participated in the commissioning of seven regulatory breaches between August 2004 and September 2008. Public hearings began last December.

The four are INBS’s former managing director, Michael Fingleton; his finance director John Stanley Purcell; one-time head of commercial lending Tom McMenamin; and Gary McCollum, who once headed INBS’s UK lending from a Belfast base.

Ms Madden told the inquiry that a Deloitte report submitted to the Central Bank in the middle of 2006 on INBS raised matters in relation to the lender’s credit committee acting outside its terms of reference with regard to numbers attending its meetings and also in relation to sanctioning loans outside its lending discretion.

Reports

Regulators were concerned about a number of matters at INBS in the second half of 2007, according to Ms Madden. These included the fact that all internal audit reports covering matters in the lender were “positively rated”; that there were issues of the credit committee acting outside its terms of reference in managing credit policy; and that loans approved to solicitors Michael Lynn and Thomas Byrne “were not in line with the society’s policies”.

Mr Byrne was sentenced in 2013 to 12 years in prison after being convicted of stealing €52 million from banks and defrauding 13 clients out of their houses or money. Mr Lynn is due to stand trial in January 2020, accused of multimillion-euro thefts.