INBS concealed decision to restrict lending from its staff

Failed lender wanted to reassure its staff as financial crisis took hold, says Fingleton

Former Irish Nationwide MD Michael Fingleton: “It was very important that that information would be confined.” Photograph: Alan Betson / The Irish Times

Former Irish Nationwide MD Michael Fingleton: “It was very important that that information would be confined.” Photograph: Alan Betson / The Irish Times

 

An Irish Nationwide Building Society (INBS) board decision in late 2007 to severely restrict lending was hidden from branch managers, because the lender wanted to reassure staff as the property market was slowing and banks overseas were coming under pressure.

“It was very important that that information would be confined,” INBS’s former long-time managing director, Michael Fingleton, told an inquiry into alleged regulatory breaches at the failed lender on Thursday.

While INBS all but decided to stop lending at the end of 2007 to concentrate on shoring up its liquidity and recovering loans out to developers, it continued to issue some home loans “as a policy to reassure our branch managers that there was no change in our society”. Mr Fingleton indicated that it was important the decision be keep confidential as some overseas lenders were experiencing strains at the time.

Mr Fingleton was speaking as he cross-examined a witness at the inquiry, which was set up by the Central Bank in 2015 and where public hearings began last December. The 80-year-old is representing himself as he and three other former executives are subject to an investigation into whether they participated in the commissioning of a series of “certain prescribed contraventions” between August 2004 and September 2008.

The other men subject to the inquiry are INBS’s former finance director John Stanley Purcell, its one-time commercial lending manager Tom McMenamin, and Gary McCollum, who once led the society’s UK lending activities from Belfast.

Credit committee

The first phase of the inquiry is concerned with the functioning of the credit committee of the now-defunct INBS, which collapsed during the financial crisis and required a €5.4 billion taxpayer bailout.

Thursday’s witness before the inquiry was Alan Deering, a former commercial property lender at INBS, who attended credit committee meetings from 2005 before becoming a committee member between late 2007 and the end of 2008.

Mr Deering said that the busy workload of the committee assessing credit applications before the late 2007 lending restrictions meant that it had very little capacity to follow up on the performance of loans after they were granted. However, he said that borrowers’ credit histories were assessed by the credit committee when they returned to the society with further loan applications.

Mr Deering said he was never informed about concerns raised by the Central Bank to INBS in 2006 and 2007 about there being no evidence of the committee reviewing cases of large commercial loan arrears, exposures to specific sectors or customers, or issues raised by internal audits, outside advisers or regulators.