Irish Nationwide inquiry hears conflicting claims over Fingleton’s role on credit committee

An inquiry into alleged lending practice breaches at Irish Nationwide Building Society (INBS) has heard conflicting accounts from former chief executive Michael Fingleton and other senior managers and directors at the now-defunct lender about their actions.

It also heard at a hearing on Monday that Mr Fingleton, who led INBS for 38 years until 2009, denied in early correspondence with the inquiry two years ago that he was accountable for any of seven alleged “suspected prescribed contraventions” at the company between August 2004 and September 2008.

Mr Fingleton (79) laid blame for the failure of INBS and wider financial system firmly at the door of the Central Bank by "suppressing material and vital information" to financial institutions at the onset of the financial crisis. He claimed in the correspondence, part of which was read out at the hearing, that the regulator's "failure to protect" lenders had "serious consequences" for INBS and others.

The inquiry was set up on foot of a Central Bank decision in July 2015 that it had reasonable grounds to suspect INBS committed “certain prescribed contraventions and that certain persons who were concerned in the management” of the company between August 2004 and September 2008 “participated in the commission” of the suspected breaches. INBS itself reached a €5 million settlement for breached in 2015 but the Central Bank waived the fine as the company was in liquidation at the time.

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Loans

Mr Fingleton, INBS's former finance director John Stanley Purcell, one-time chairman Michael Walsh, former commercial lender Tom McMenamin and Gary McCollum, who once headed UK lending from a base in Belfast, are each subject to the current inquiry, the first of its kind by the Central Bank.

While the inquiry held its first public hearing in November last year, all proceedings up until now have been about the logistics and management of the case.

Brian O’Moore of the team of legal practitioners assisting the inquiry told the hearing on Monday that the inquiry centres around seven suspected contraventions.

These include allegations that at least some of the five men failed to ensure that commercial loan applications were processed and approved correctly. It is also alleged that the executives failed to ensure that commercial lending was effectively monitored in line with internal policies. The inquiry has the power to impose fines of up to €500,000.

The first module of the hearings, which started on Monday, centres around the so-called fifth suspected prescribed contravention (SPC): the role of the credit committee during the period under investigation. Mr McCollum is the only one of the five men not subject to this element of the inquiry, Mr O’Moore said.

The committee’s work focused on large commercial loans in arrears or deemed to be non-performing, loans submitted for review, the management of the society’s exposure to certain sectors and concentration of lending risk, as well as any issues raised by internal auditors or regulators.

Statement

Mr O’Moore noted that Mr Fingleton said in a witness statement in August 2017 that the executive was not on the society’s credit committee until December 2007 and that the committees’ functions were effectively diluted the following month by new terms of reference. However, Mr Purcell said in his statement that his long-time boss was a member of the committee during the period under investigation, Mr O’Moore said.

Mr McMenamin, who has not been co-operating with the inquiry in recent months and who failed to turn up to Monday’s hearing, questioned in a letter to in October 2016 why he was subject to the proceedings, as his “position was little more than an administration officer acting on the instructions of the managing director [Mr Fingleton]”, according to Mr O’Moore.

However, Mr Purcell said that Mr McMenamin was a permanent member of the credit committee and the inquiry also heard that he allegedly often chaired its meetings.

Mr Walsh highlighted in a lengthy statement to the inquiry that he was never on the credit committee nor an executive of the society.

Mr Fingleton, who is representing himself at the inquiry, is expected to give his opening statement to the inquiry on Tuesday.