INBS failed to check major property clients’ ability to repay, inquiry hears

Public hearings into defunct lender resume after Covid-19 delay

The defunct Irish Nationwide Building Society, as it previously appeared on Dublin’s Grafton Street.

The defunct Irish Nationwide Building Society, as it previously appeared on Dublin’s Grafton Street.

 

A long-running inquiry into the now-defunct Irish Nationwide Building Society (INBS) has heard that the lender allegedly granted loans to some major commercial property clients during the boom years without properly assessing their ability to repay their debts.

The inquiry, originally set up in 2015 on foot of a Central Bank order and which started public hearings almost three years’ ago, held its first public session of 2020 on Friday, having been delayed for months due to the Covid-19 crisis.

Much of the evidence in the coming months will be given privately as it relates to confidential information on 98 sample commercial loans granted to nine borrowers before the 2008 property crash. These accounted for 20 per cent of INBS’s commercial loans as of early 2010.

Eoin McCullough, SC, for the legal team assisting the inquiry, said the society is suspected of failing to get sufficient information from borrowers in the case of 86 of the loans to show they had the capacity to repay. Many related to UK property deals managed from INBS’s Belfast office.

INBS’s own policies stated that commercial borrowers should provide three years of audited accounts, a set of business plans and a cash flow forecasts to help demonstrate creditworthiness.

All such loans also required the completion of detailed commercial loan applications to help INBS’s credit committee and board decide whether to grant credit. However, Mr McCullough said that there is no evidence at all of such applications being prepared for 14 of the sample loans, while it is “suspected” that the documentation wasn’t compiled in advance of further loans being drawn down.

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.

Final phase

The final four suspected contraventions – all relating to the 98 specific loans – are being wrapped up in the final phase which will continue into early 2021. Mr McCullough said on Friday that the panel will have to consider cases where commercial loans were advanced without sufficient approvals.

Since public hearings started, the Central Bank has reached settlement agreements with two of the five former INBS figures – 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 (82), last December 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 is set to make a statement to the inquiry on Tuesday morning.