INBS assurances to financial regulator not followed through, inquiry hears

Irish Nationwide Building Society (INBS) assured the financial regulator that a key committee was considering a series of credit risk reviews when it was not doing so, the inquiry into alleged breaches of lending practice at the society has heard.

The financial regulator recommended in 2007 that the INBS credit committee, which sanctioned and declined loans, should include discussions of credit risk in the minutes of its meetings.

The regulator was concerned that there was no evidence that the committee was considering the credit reviews of major commercial loans, despite auditors KPMG having earlier recommended that the reviews should be formally reported to the committee.

In a January 2007 response to the regulator signed by former managing director Michael Fingleton, INBS indicated credit risk management discussions would be recorded in the meeting minutes. After further questions from the regulator, INBS replied that the credit committee considered all reports given to it and that it would record this in minutes from June 2007.

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Inquiry witness Martin Noonan, who was a member of the INBS credit committee at the time, said he had not been made aware of this correspondence between the financial regulator and INBS. He confirmed that the recommendations were not implemented.

Mr Noonan, who provided INBS with certain residential mortgage services, also told the inquiry that he had “no idea” why some discussions that did take place at meetings of the credit committee were not recorded in the minutes.

Internal policies

This module of the Central Bank’s inquiry into INBS is exploring whether the 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 audits, outside advisers or regulators.

Mr Fingleton has said he was not a member of this committee until the end of 2007, but this has been contradicted by several other witnesses to the inquiry, including Mr Noonan, who said he knew Mr Fingleton attended its meetings “from talk around the building”.

The 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 Stan Purcell, former commercial lending manager Tom McMenamin and Gary McCollum, who once led the society's UK lending activities from Belfast. Mr Fingleton and Mr Purcell are both representing themselves at the inquiry.

In cross-examination, Mr Fingleton suggested to Mr Noonan that members of a separate provisions committee, which included both men, had equal say in its discussions. Mr Noonan agreed that “full discussions took place”. He added: “Did I have as much clout as you had? No. Nobody had.”

Mr Purcell questioned Mr Noonan about his previous day’s evidence in which he said he assumed it would “normally” be Mr Purcell’s responsibility to deal with the KPMG recommendation to formally report the credit reviews to the credit committee. Mr Purcell asked Mr Noonan to confirm that an INBS document stated this was the responsibility of the credit review officer.