Thursday 27 October 2016

Ex Nationwide's Fingleton defends €27.6m pension pot, regrets no decisions made

He also defended his €27m pension pot

Clodagh Sheehy

Published 02/09/2015 | 07:40

Michael Fingleton, former Chief Executive of the Irish Nationwide Building Society arriving at the Banking Inquiry at Leinster House yesterday.Pic Tom Burke b2/9/2015
Michael Fingleton, former Chief Executive of the Irish Nationwide Building Society arriving at the Banking Inquiry at Leinster House yesterday.Pic Tom Burke b2/9/2015
Michael Fingleton, former Chief Executive of Irish Nationwide Building Society

Former Irish Nationwide chief executive Michael Fingleton said today he very much regretted that he was "continuing to pay the price personally" for the collapse of the whole financial market.

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He also regretted that the taxpayer had to pick up the bill, he told the Banking Inquiry.

He justified his €27.6m pension pot on the grounds that he had taken over the management of his own pension fund in the early 1990’s and had himself, through investment, increased the fund almost tenfold.

He said it had cost the Society about €3m by his own estimation or €4m if the view of some experts was to be taken.

He had taken over the management of the fund because when he looked at it the value that had accrued at the time was lower than the lowest deposit account rate operated by the Society.

His bonuses were decided by a committee at the society.

The former building society chief executive accused AIB and Bank of Ireland of “competitive opportunism” in trying to have Irish Nationwide nationalised on the night of the Bank Guarantee.

He also  that his building society was solvent that night with a liquidity ratio “well in excess of the minimum requirements of the Regulator”.

Mr Fingleton said there was “no basis or evidence” by the pillar banks on which to push for the nationalisation of INBS.

“The motivation of the pillar banks in my view was competitive opportunism to eliminate a highly competitive deposit interest institution which would have allowed the pillar banks to pay much lower deposit rates as is in evidence today.”

He believed the lending strategies and risk strategies of INBS were “appropriate for the lending market in which the Society operated.

Questioned by Pearse Doherty about his role in the bank, he said “I don’t regret any decision I took.  I do regret the Society had a commercial loan book that at that time was too large.”

Questioned further he admitted “I was part of the operation, part of the decisions to engage in commercial development”.

He said he regretted it now “of course” that the loan book had become too large but at the time he it was a normal commercial decision based on the demographics.

Read here: Michael Fingleton's opening statement

He ran INBS from 1971 until he stepped down in 2009. INBS cost taxpayers €5.4bn to bail out.

A copy of his witness statement reportedly shows that Mr Fingleton is adamant that INBS was solvent on the night of the notorious bank guarantee on September 29/30, 2008.

Mr Fingleton also has some harsh things to say about the Financial Regulator. He is equally critical of rivals in Allied Irish Banks and Bank of Ireland, who sought to have INBS nationalised on the night of the guarantee, as merely trying to take competitors out of the market.

Mr Fingleton's own pay and pension arrangements will also be the focus of attention. In 2009, it was reported that he would repay a €1m bonus - but this never happened. It also emerged that a pension fund worth almost €28m had been provided for him.

​He did not accept "there were poor lending practices" at INBS which was eventually the subject of a €5.4bn bailout by the state.

Asked by Deputy Kieran O'Donnell if bonuses at INBS were warranted in 2006/7, he replied "Oh not at all, in hindsight they were not".

He was also asked if he accepted that INBS had the single biggest bank failure in the history of the Irish state.

Mr Fingleton said if you accepted the discounts applied by NAMA that was the case but he did not accept them and said he "will produce evidence at a future date".

He added that even if the bailout had been €4bn it would still be too much and with hindsight "we would all have done things differently".

A question by Senator Susan O'Keeffe about a bonus of €1m for Mr Fingleton in 2008 was disallowed by the chairman for legal reasons.

In response to questions from Deputy Paul Phelan Mr Fingleton said it was a "myth"  that he was the entire Building Society.

"I was suffering from the perception that was out that that it was me and me alone" - running the Society - he explained. "I was seen as the face of the Society".

He admitted:  "I did promote myself"  but stressed that this was purely  "because we couldn't afford to buy advertising at the time" and this was how the perception of him had evolved.

​He said​ his powers were only the "normal" ones of a CEO, given by the Board and approved by  the Financial Regulator.

He told Senator Marc Mac Sharry he had held loans from the Society.  "I had some buy-to-let properties over the years".

He said, however, "I always had a deposit account with the Society that was at least as much as the exposure on the loans and sometimes double".​

Mr Fingleton told Deputy Michael McGrath he felt wronged.  He felt he had been "misrepresented".  He calculated that 80pc of what was written about him "by certain individuals" was wrong, 10pc might be disputed and 10pc would be correct.

"Do you feel wronged" asked Deputy McGrath.  "I certainly, certainly do".   He also denied that the Building Society was his "personal fiefdom".

Later, a scathing attack on the Central Bank and Regulatory Authorities was made by Michael Walsh former non-executive chairman of Irish Nationwide Building Society.

He told the Banking Inquiry that despite having serious misgivings about the stability and sustainability of the Irish Banking system by 2006 they had failed to bring these to the attention of the institutions they were tasked with overseeing.

“To this day I cannot understand why the Authorities did not intervene in the markets before the financial crisis broke months later.”

Mr Walsh said that if INBS had been made aware of the concerns at that stage it could have taken action and “traded its way out of subsequent difficulties and come through without recourse to the taxpayer.

“It is a matter of enormous frustration, disappointment and regret that successive legislative delays combined with the unwillingness of the Central Bank to exercise its power” had prevented the sale of Irish Nationwide long before 2007.

“It is clear that, if the sale had been allowed proceed in a timely fashion, the value destruction and cost imposed on Irish tax payers could have been avoided and a return delivered to the Society’s members.”

Mr Walsh said that at no stage after 2004 did the Central Bank and Financial Regulator “take any meaningful action in relation to lending or lending related issues”

Contrary to some evidence, he added, the regulator was far from toothless and had no hesitation in using its powers.

He insisted that the Society was solvent on the night of the Bank Guarantee and that the guarantee was unnecessary - a view he had expressed in writing to the authorities. “A full deposit guarantee would have sufficed”, he added.

Mr Walsh said the Society had played its part in the crisis but he was concerned by the popular depiction of it as being in the poorest financial health of all institutions.

The Society had failed “because its core business was funding property”. It did not anticipate the instability in the global markets and its effects on that core business at a sufficiently early stage.

It was, he believed, the first of all the Irish lending institutions to anticipate and respond to the changed market circumstances in late 2007 and on his initiative the Board decided to minimise lending and build liquidity.

He disagreed that the INBS bailout had cost €5.4bn. While accepting that not a single penny bailout was acceptable he said “under any reasonable assessment the deficit could not have been that high (€5.4bn).  His own estimate was a maximum of €3.8bn.

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