Nationwide's boss may face €500k sanction
Central Bank is set to grill Fingleton over loans
THE Central Bank is preparing a landmark case against former senior executives and board members of Irish Nationwide. The investigation has identified about 40 different cases where the building society appears to have broken the rules of banking.
The investigation, which has been under way for two years, could lead to fines of up to €500,000 each for Michael Fingleton, former chief executive of Irish Nationwide, and Michael Walsh, its chairman from 2001 to 2009, as well as other individuals.
Other sanctions the Central Bank may impose on individuals involved in loose lending by the toxic society include disqualification for a number of years from the management of a regulated financial service provider.
The Central Bank's investigation has reached the stage where it is in written communication with former senior players in the society which has cost taxpayers €5.4bn. Fingleton is understood to have asked for assurances that his legal costs will be picked up by the State before responding.
In the course of trawling Irish Nationwide's disorganised files, the Central Bank has uncovered unorthodox lending to both household and low-profile developers where the society may have breached banking rules. The Central Bank is looking at different cases where large loans were granted to developers without approval by credit committees; millions were given to developers for unknown purposes; and major loans were given without proper board oversight as part of its wide-ranging case.
The case against Irish Nationwide is examining how lending decisions that appear to have ignored the society's stated corporate governance and credit controls were nonetheless made.
Walsh, as chairman and a former professor of banking, will have the delicate task of defending his years in the chair from 2001 to 2009, when the society went on an unchecked lending rampage that has cost the State billions.
Fingleton was granted extraordinary powers by his board over the decades but this did not mean he had the power to act without any oversight from his board.
Stan Purcell, the society's secretary and long-standing finance director, will also be questioned about the society's practices and processes as he is a key link-man between the board and executives.
The society was explicitly warned about failings in the areas of internal audit and credit control several times from 2000 on by KPMG but these faults were never fully rectified.
Fingleton, who is currently overseas, did not respond to attempts to contact him. He is understood to have detailed knowledge of his loans to various individuals, including politicians, down the years.
Purcell, who is now working as an adviser to individuals and business owners, said: "I don't want to engage. Thank you." Walsh didn't return calls.
All three and others under investigation are believed to have denied all wrongdoing.
The Central Bank's investigation team, which is led by its director of enforcement Peter Oakes, has a full-time case officer and legal adviser gathering information in the Enforcement 1 Division of the Central Bank.
The extent of any sanction will depend on various factors being examined by the Central Bank, including whether the society or individuals acted in what its procedures term a "deliberate, dishonest, or reckless way".
It will also examine the "general compliance history" of the society and whether it had "previously been requested to take remedial action". A full formal inquiry will begin in 2013, when the Central Bank has completed gathering its evidence.
The Central Bank is also understood to have referred a number of reports relating to loans granted by the society for examination by gardai.
Sunday Indo Business