Madam, – As the vultures surround the EBS Building Society, it is difficult to pinpoint exactly where it all went wrong.
As a middle manager there during the best part of the 1980s and early 1990s, I was proud to be part of an organisation that modelled itself on the core values that most of the building societies represented.
It was owned by the members and run for the members. Very simple principles drove the business: residential mortgages were the primary economic purpose, funded largely by personal shares and deposits. It was a very basic model indeed – for every six savers, we could create one mortgage; for those who wanted to borrow, they would have to prove that they could afford it in the foreseeable future.
Collateral was important, but not a good reason for lending in itself. Good lending depends on collateral, but collateral did not exactly ensure good lending. In those days, for those who wanted loans for commercial purposes, they would probably have to put up about 35 per cent of the value of the security, and then would only be able to borrow over an absolute maximum of 15 years.
Though many of us privately envied the marketing capabilities of First National, the exuberance and eccentricity of Irish Nationwide and the sheer power of the Irish Permanent, the management of the society knew the importance of a sound balance sheet. After all, it was run by qualified accountants. When I arrived, Henry O’Dwyer was the CEO, followed by Pat O’Reilly. They built competent management teams, and without exception these were decent and gifted people of impeccable integrity – John Cullen, the late Aindrias O’Scolai, Martin Walsh, John Flanagan and Joe Ryan, to mention a few. They knew about the principles of corporate governance before the term was invented and turned into a set of hollow platitudes.
It is a great pity for the Irish economy that the mutual mortgage lenders will soon be lost forever. Ireland will be poorer for it. – Yours, etc,